Coping with Slippage
Transaction splitting is a technique used in cryptocurrency trading to minimize the impact of slippage on trades. It involves breaking down a large trade into multiple smaller trades, which are then executed at different price points to reduce the overall price impact.
In DEXes, where liquidity can be limited and slippage can be high, transaction splitting can be a useful tool for traders to minimize the negative impact of slippage on their trades. By splitting a large trade into multiple smaller trades, traders can reduce the impact of their trades on the market and avoid causing sudden price movements that can lead to slippage.
Smart order routing (SOR) is a technique used in trading to optimize the execution of trades across multiple markets and liquidity pools. It involves analyzing market conditions, such as liquidity, depth, and price volatility, to determine the best route for a trade to achieve the best execution price and minimize slippage.
In decentralized exchanges, SOR can be particularly useful as it allows traders to access liquidity across multiple platforms and liquidity pools, reducing the impact of low liquidity and slippage. SOR algorithms can analyze the prices and liquidity levels of different markets and pools, and route trades to the most optimal venue.
SOR also allows traders to access liquidity across multiple chains which can be particularly useful for traders looking to access assets that are not available on a single chain. By routing trades across different chains and pools, SOR can help traders achieve better execution prices and reduce slippage.