Slippage and price impact explained
Distinguish slippage from price impact with a numerical example and understand minimum output, changing quotes and execution tradeoffs.
Two different effects
Price impact describes how the trade’s size affects the price available against liquidity. Slippage describes the difference between an expected execution and the execution actually achieved. They can occur together, but increasing a tolerance does not create more liquidity or eliminate price impact.
A minimum-output example
Suppose a quote estimates 100 units of the output token. In a simplified calculation, a 1% tolerance corresponds to a minimum output of 99 units. This is a teaching example, not a recommendation or a statement of Rialto’s implementation. Actual calculations may include rounding, fees and interface-specific rules.
Why a quote changes
Market prices, available liquidity and other transactions can change between observation and execution. A new quote may therefore differ even when the input amount is unchanged. Refreshing a quote provides a more recent estimate, but no estimate should be mistaken for a guarantee of settlement.
Responding to a poor quote
Review asset identity, trade size, reference price and costs before changing any setting. A larger tolerance permits a wider range of outcomes; it is not a universal solution to an unsuccessful trade. Splitting an order may alter price impact but can also introduce extra transaction costs and exposure to movement between trades.