Price Impact and Slippage Tolerance
Users specifically newcomers are advised to "watch out" Price Impact (or Slippage) when you swap tokens.
Price Impact is essentially the expected price difference in % between the quoted price and the executed price.
You can check the Price Impact of your trade after you have entered the amount of your Input Token.
Slippage Tolerance is the MAX price impact a user is willing to tolerate when executing a trade. It can be set in the "Settings" when you hit the little button on the top-right corner of the "Swap interface".
You can pick default 0.1%, 0.5%, and 1% for your slippage tolerance, or you can customize it.
Assume the following pool info:
- BNB = 200
- MODO = 10,000
- Quoted Price (MODO/BNB) = 50
- Constant Product () = 2,000,000
Now, input 1 BNB for MODO
- BNB in the pool = 200 + 1 = 201
- Constant Product is 2,000,000 (it is constant)
- MODO in the pool = Constant Product / BNB in the pool = 9950.25
- Output MODO = 10,000 - 9950.25 = 49.75
- Executed Price = Output MODO / Input BNB = 49.75
Price Slippage = the price difference between Quoted Price and Executed Price = 50 - 49.75 = 0.25
Price Impact = the price change in % = 0.5%