What is slippage in trading?
In one line: Slippage is the difference between the price you expected for your order and the price it actually filled at.
A simple example
A stock shows $30.00. You click buy with a Market order for 100 shares. Before your order reaches the market, the price ticks up, and you fill at $30.06.
That 6 cents is slippage. On 100 shares, it cost you $6 more than you expected.
It hits stops too. You're in a buy with a Stop loss at $28.50. Bad news comes out and price jumps from $28.70 straight to $28.20. Your stop becomes a market order and fills around $28.20. You lose 30 cents a share more than you planned.
When it's most likely
- Big news, like CPI, jobs reports or FOMC decisions.
- Fast markets with high Volatility.
- Thin markets with low Liquidity: small stocks, quiet hours.
- Gaps, when price opens far from where it closed. See Gap.
Slippage can also go your way. Sometimes price moves in your favor before you're filled. But the bad kind is more common in fast, one-sided moves.
Why it matters
Your risk plan assumes your stop fills at your stop. Slippage means the real loss can be a bit bigger. If you always trade right before big news, those extra bits add up.
It also matters for small targets. If you aim for 10 cents and lose 5 to slippage and the Spread, half your plan is gone before price even moves.
A common mistake
Using market orders in a fast market. A market order says "fill me at any price." In a calm market, that's fine. During news, "any price" can be quite far from what you saw.
A Limit order avoids slippage on entries, because it fills only at your price or better. The trade-off is it may not fill at all. The difference is laid out in market vs limit order.
Many traders simply avoid entering in the minutes around big scheduled news. An economic calendar shows when those are.
Questions
Can slippage be avoided?
Not completely, on stops. You can reduce it by trading liquid markets, using limit orders to enter, and staying out around big news.
Is slippage the broker's fault?
Usually not. It happens because prices move between when you send an order and when it fills. Fast or thin markets make the gap bigger.
Does slippage happen in forex and crypto too?
Yes, in every market. It tends to be smaller in very busy markets and bigger in quiet or news-driven ones.
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