Slippage

What is Slippage?

Slippage occurs when a trade is executed at a price other than what you intended. This can happen in any market: stocks, forex, or futures. It happens more often during periods of high activity or when there are not enough buyers and sellers.

Key Features

• Types of Slippage

Positive Slippage: You get a better deal than you expected-buying at a lower price or selling at a higher price.

Negative Slippage: You pay a worse price—to buy at an inflated price or sell for a lower price.

• Why That Happens?

Fast-Paced Markets: When changes in price happen rapidly, the market moves before your order can fill.

Lack of Liquidity: Quieter markets won't have enough buyers or sellers at your price.

Very Large Orders: A major trade might not be able to find enough matching orders available at your price.

• Impact on Your Trades

Increased costs and a possibility for slippage impact profit. Active traders ought to know how this might be working against their bottom line results, too.

• How to Reduce Slippage?

Use limit orders instead of market orders. Limit orders specify that a maximum or minimum is okay.

Don't trade near times when major news happens, such as economic reports.