It is the difference between the final executed price and the original order price.
How does it Happen?
This happens mostly when the Market is volatile in the time when financial news is being released or financial and economic data is being announced. The below images makes it easy to under stand what it really means, and for those who trade during data release you can confirm that you can set you pending order and your order is not execute at the price you want but its released on another price and that slippage.
In Decentralized Exchanges like Pancakeswap, Uniswap etc, if you try to purchase coins lets say with slippage 0.5% your order might not go through and you wonder why it happens. So normally the token developers will advise on their website the slippage for sell orders and slippage for buy orders.
Higher slippage is not even good at all as it can make you lose money and buying on unfavorable prices. I believe mos traders lose money through this and they do not know what it is and how to avoid it especially to newbies as-long their transaction is processed they are good to go.
How to avoid higher slippage
As said before higher slippage is not good as it will make you lose money so you have to avoid higher slippage and here are the ways to avoid it. When you are buying on a Centralized Exchange make sure that you buy and limit with sell orders that is the only way you can override this. If you use the market orders you have to know that you will be buying and selling at whatever the market offers you and mostly the Market has an edge.
The above image is of a transaction which failed to go through on pancake swap due to low slippage. Normally on other tokens anything less than 15% will not work unless you perform the trick and i am gonna show you on the next image.
If you are buying on Decentralized Exchanges like Pancake or Uniswap you have to play with the last figures. Lets say you want to buy 614841 Hungry Doge tokens and the slippage for your order to go through is 12% and you want to override that. you just have to use slippage 1% and then on the number of tokens just change the last digit from 1 to 0 and you are good to go.
The picture below shows a transaction being successful with slippage of 1%. After it was rejected with slippage 10% i then showed you it can work with a lesser and make sure i am on the winning side.
Yes, some tokens have very high slippage rates. I think it's because investors who buy don't sell soon. Thus, the value of the token will not decrease immediately. For example, a token with a slippage rate of 10% must increase by at least 20%, as there will be 10% deduction when buying and 10% when selling. The investor needs to increase more in order to make a profit. In this case, the investor has to hold that token for a long time. This results in an increase in the price of that token.