Slippage
Definition
Slippage is the difference between the price you expect to trade at and the price your order is actually executed at. It usually occurs during fast markets, low liquidity, or when prices gap. Slippage can increase trading costs and risk, and how a broker handles slippage is a key factor when comparing platforms.
In Plain English
In plain terms, slippage happens when your trade is filled at a worse (or sometimes better) price than requested. You ask to buy or sell at one price, but the market moves before the broker can execute the order. The result is an execution price that does not match your expectation.
How It Works
- You place an order, such as a market order or a stop-loss order.
- The broker attempts to execute the order at the best available price.
- If the market price changes between order submission and execution, slippage occurs.
- Slippage can be negative (worse price) or positive (better price), depending on market movement.
- Slippage is more common during volatile periods, news releases, market opens, and illiquid sessions.
- For stop-loss orders, slippage occurs because the stop triggers a market order once the level is reached.
- The final execution price depends on available liquidity and the broker’s execution model.
Why This Matters for Traders
Slippage affects real-world trading outcomes by increasing effective costs and altering risk assumptions. Even small amounts of slippage can materially affect frequent traders or strategies that rely on tight stops. For longer-term traders, slippage is most noticeable during gaps and sudden market moves, where exits may occur at significantly worse prices than planned.
Common Misunderstandings
- Slippage only happens with bad brokers: all brokers experience slippage during fast markets.
- Slippage is always negative: positive slippage can occur, though some brokers do not pass it on.
- Limit orders always eliminate slippage: limits prevent worse prices but may result in no fill.
- Slippage and spread are the same: spread is a quoted cost; slippage is an execution outcome.
- Stop losses guarantee the exit price: standard stops are vulnerable to slippage.
How This Affects Broker Choice
Slippage handling is one of the clearest indicators of broker execution quality. When comparing brokers, users should consider:
• Whether the broker publishes slippage statistics or execution reports.
• If positive slippage is passed on to clients or retained by the broker.
• How orders are routed (market maker vs agency-style execution).
• Speed and reliability of execution during volatile periods.
• Transparency in trade confirmations showing requested vs executed prices.
From a monetisation and comparison perspective, slippage content supports deeper broker reviews, where execution quality, order routing, and pricing fairness can be compared side by side.
Risks & Common Mistakes
• Using market orders during major news events without accounting for slippage.
• Placing stop losses too close to price in volatile markets.
• Assuming low advertised spreads mean low total trading cost.
• Ignoring how liquidity differs by instrument and trading session.
• Choosing brokers that do not disclose execution quality or slippage behaviour.
Risk note: slippage can significantly increase realised losses during fast or gapping markets, especially when combined with leverage.
Real-World Example
You place a market order to sell a CFD at £100 following unexpected news.
• The price moves rapidly and available liquidity is thin.
• Your order executes at £98 instead of £100.
The £2 difference is slippage. If you were trading a large or leveraged position, this difference could materially affect the outcome of the trade.
What to Check Before Trading
- Does the broker publish data on execution speed and slippage?
- Are positive slippage outcomes passed on to clients?
- How are stop-loss orders handled during gaps and fast markets?
- Does the broker offer guaranteed stop losses, and at what cost?
- How transparent is trade history in showing execution prices?
- Are execution terms clearly documented in the broker’s legal disclosures?
- Is the broker regulated under a framework with execution standards?
Related Concepts
Stop losses commonly experience slippage because they convert into market orders when triggered.
Spread is a quoted cost, while slippage reflects execution quality beyond the quoted price.
Market orders prioritise execution speed over price certainty, making slippage more likely.
Guaranteed stops remove slippage risk on exits but usually involve additional costs.
Lower liquidity increases the likelihood and size of slippage during order execution.
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Risk Warning: This website does not provide financial, investment, or trading advice. All information is for educational purposes only. Trading and investing involve substantial risk of loss. You should carefully consider your financial situation and consult with qualified professionals before making any financial decisions.