Deciphr Academy
Track 4 · Markets and DeFi · Module 18

Liquidity, order books and slippage

Why the price you see isn't always the price you get.

Lessons
7
Reading
48 min
Quiz
15 questions
Pass mark
80%
  1. 1What liquidity meansWhat does liquidity mean in crypto and other markets?6 min
  2. 2The order bookWhat is an order book, and how do market and limit orders work?7 min
  3. 3Walking the bookWhy does a large market order get a worse price than the one on screen?7 min
  4. 4Slippage and slippage toleranceWhat is slippage in crypto, and what does slippage tolerance do?7 min
  5. 5Price impact in pools, and splitting tradesWhat is price impact on a DEX, and does splitting a big trade help?7 min
  6. 6MEV and sandwich attacksWhat is MEV, and how does a sandwich attack work?7 min
  7. 7The Brindlecove sale: three ways to sellMarket order, limit order or splitting the trade - what changes when you sell a large amount?7 min

The case used in this module

Each module tells its own made-up Brindlecove story, so details can differ from one module to the next.

Key words

Liquidity
How easily you can buy or sell something quickly, without moving its price much.12
Market depth
How big a trade a market can absorb without the price moving; often measured by the orders waiting at the best prices.23
Bid-ask spread
The gap between the highest price a buyer will pay (the bid) and the lowest price a seller will accept (the ask).4
Mid price
The price halfway between the best bid and the best ask. A useful reference, but on an order book every trade matches a bid or an ask.5
Order book
An exchange's list of the buy orders (bids) and sell orders (asks) waiting to be matched.56
Market order
An order to buy or sell straight away at the best price available. It almost always fills, but the price is not guaranteed.78
Limit order
An order to buy or sell only at a set price or better. It protects the price, but may not fill.7
Stop order
An order that turns into a market order once the price reaches a set stop price.7
Taker
A trader whose order matches straight away against orders already on the book, removing liquidity.6
Average fill price
What an order paid or received in total, divided by the number of tokens, when it fills at several prices.79
Slippage
The gap between the price you were quoted and the price your trade actually got.1011
Slippage tolerance
The most the price may move against you before a DEX swap is cancelled instead of filled.129
Price impact
How far your own trade moves the price, because it uses up the liquidity available.95
MEV
Maximal extractable value: profit taken by including, leaving out or reordering transactions in a block.13
Sandwich attack
Trading just before and just after someone's large swap, to profit from the price move their swap causes.1310
TWAP order
An order that splits a large trade into smaller pieces traded at set intervals, to reduce price impact.14
Sources
  1. Liquidity (or marketability) (glossary). Investor.gov, US Securities and Exchange Commission.
  2. Market liquidity and stress: selected issues and policy implications (BIS Quarterly Review, special feature). Bank for International Settlements (Claudio Borio), November 2000.
  3. Financial Stability Report, section 1: Asset Valuations. Board of Governors of the Federal Reserve System, May 2026.
  4. Ask price (glossary). Investor.gov, US Securities and Exchange Commission.
  5. Data Streams Liquidity-Weighted Bid-Ask Prices (LWBA). Chainlink documentation.
  6. Exchange Trading Rules. Kraken (Payward).
  7. Understanding Order Types (Investor Bulletin). Investor.gov, US Securities and Exchange Commission, Office of Investor Education and Assistance, 12 July 2017, updated 18 August 2026.
  8. Market order (glossary). Investor.gov, US Securities and Exchange Commission.
  9. Understanding Swaps on Uniswap. Uniswap developer documentation.
  10. What is Slippage?. Uniswap Labs blog, 11 September 2025.
  11. Order Types. FINRA (Financial Industry Regulatory Authority).
  12. How to Minimize Slippage on Your Swaps. Uniswap Labs blog, 25 October 2025.
  13. Maximal extractable value (MEV). ethereum.org developer docs, last updated 26 February 2026.
  14. TWAP orders. CoW Protocol documentation.