Fee/Price Impact/Slippage

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1. Slippage

Slippage refers to the difference between the expected price of a token and the actual price at which the trade is executed. This often occurs in DEX trades due to constant price fluctuations and liquidity availability.

• Causes of Slippage:

  • Price volatility during the transaction (especially with low-liquidity tokens).

  • Large trades that significantly affect the price in the liquidity pool.

• How to Control Slippage:

  • You can set a Slippage Tolerance on the trading interface. For example:

    • 0.1% - 1%: Suitable for popular tokens with high liquidity.

    • 3% - 10% or higher: Suitable for new or low-liquidity tokens.

Note: If price fluctuations exceed the set Slippage Tolerance, the transaction will fail to prevent significant losses.

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2. Price Impact

Price Impact is the degree to which your trade affects the token price in the liquidity pool. This happens because of the automated pricing mechanism based on the token ratio in the pool.

• How It Works:

  • When you trade, the token you're selling increases in the pool, while the token you're buying decreases, causing a price change.

  • Small trades generally have a low Price Impact, while large trades result in a high Price Impact.

• Implications:

  • Low Price Impact: You trade at a price close to the market price.

  • High Price Impact: You receive fewer tokens for the same input amount (due to price increase/decrease).

Note: Avoid large trades in low-liquidity pools, as Price Impact can be significant.

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3. Fee

Fee refers to the costs incurred when executing a trade on PassDEX, which includes:

• DEX Trading Fee:

  • A small percentage of the transaction amount (typically 0.1% - 0.3%) paid for:

    • Liquidity providers (LPs).

    • The platform (if applicable).

• Gas Fee:

  • A network fee paid to the blockchain (Ethereum, BNB Chain, etc.) for processing the transaction.

  • Gas fees are determined by the network, not PassDEX.

  • Congested networks may result in higher gas fees.

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Summary:

• Slippage: The difference between the expected and actual trade price due to market fluctuations.

• Price Impact: The effect of your trade on the token price in the liquidity pool.

• Fee: Includes trading fees (for DEX and LPs) and gas fees (for the blockchain network).

Tips: To minimize risks:

1. Check and set your Slippage Tolerance before trading.

2. Trade in pools with high liquidity to reduce Price Impact.

3. Monitor gas fees and trade during times when the network is less congested.