Slippage tolerance is a setting in trading platforms that allows you to determine how much price slippage you're willing to accept so that your order can be executed.
Price slippage is the difference in prices between the time a market order is placed and the time it completes on the blockchain or is filled. Slippage can either be positive or negative, depending on the direction of price change.
Slippage tolerance is a setting for the amount of price slippage you are willing to accept for a trade. By setting slippage tolerance, you basically setting a minimum amount on how many tokens you will accept, in the event that the price increases or decreases. Slippage tolerance is set as a percentage of the total swap value. For example, if you set slippage tolerance at 5%, it means that the amount of tokens you will receive can be no higher or lower than 5% of the amount entered.
This setting is especially useful during times of high price volatility. When slippage tolerance is set too low (and there are high price swings), your transactions have a higher chance of failing. When tolerance is set too high, then you are willing to “pay” more for “less coins”. The default setting is set to 0.50%.