When swapping tokens on the Binance Smart Chain traders are faced with the issue of determining the slippage tolerance for the transaction. For experienced investors this is nothing new but for new investors this step can be somewhat of a challenge. Let’s take a look at what slippage actually is and how to effectively use it in different trading scenarios.
Slippage is the difference between the expected price of a trade and the price at which the trade is executed. Let’s assume the price of a token is $1, if we set our slippage to 10% it means we are willing to accept any price ranging from $0.9 to $1.1 per token. In order to estimate the necessary tolerance, we need to take into account a few variables. The first one is the tokenomics, if the token we want to swap has buy or sell taxes we must take those into account when estimating the slippage. The second important detail is the price volatility. Prices on the Binance Smart Chain, especially those of low market cap tokens, can be very volatile. If the tokens price is constantly fluctuating, our trade could keep getting rejected. To avoid these frustrations, it is advisable to set the slippage a bit higher to make sure the transaction goes through.
One of the most common issues for investors is trying to swap a token that has just been launched. When a token is released for trading, the price volatility is usually at its highest since many investors are trying to get in at the same time. In this case it is advisable to set the slippage slightly higher to make sure the transaction goes through. This is however very risky, since the trader could end up receiving a less than desired number of tokens.
A great tool to help you estimate slippage is app.marketmove.ai. If you look up the asset you are trying to swap, the app will inform you if there are any taxes thus helping estimate the required slippage. In the future you will also be able to use our in house swap feature with auto slippage, completely eliminating the hassle of manual research.