Slippage

AAA

DEFINITION of 'Slippage'

The difference between the expected price of a trade, and the price the trade actually executes at. Slippage often occurs during periods of higher volatility, when market orders are used, and also when large orders are executed when there may not be enough interest at the desired price level to maintain the expected price of trade.

Slippage is a term often used in both forex and stock trading, and although the definition is the same for both, slippage occurs in different situations for each of these types of trading.

INVESTOPEDIA EXPLAINS 'Slippage'

In forex, slippage occurs when a limit order or stop loss occurs at a worse rate than originally set in the order. Slippage often occurs when volatility, perhaps due to news events, makes an order at a specific price impossible to execute. In this situation, most forex dealers will execute the trade at the next best price.

Slippage in the trading of stocks, often occurs when there is a change in spread. In this situation, a market order placed by the trader may get executed at a worse than expected price. In the case of a long trade, the ask may have increased. In the case of a short trade, the bid may have lowered. Traders can help to protect themselves from slippage by avoiding market orders when not necessary.

RELATED TERMS
  1. Electronic Communication Network ...

    An electronic system that attempts to eliminate the role of a ...
  2. Implementation Shortfall

    In trading terms, the difference between the prevailing price ...
  3. Ask

    The price a seller is willing to accept for a security, also ...
  4. Spread

    1. The difference between the bid and the ask price of a security ...
  5. Transaction Costs

    Expenses incurred when buying or selling securities. Transaction ...
  6. Bid

    1. An offer made by an investor, a trader or a dealer to buy ...
Related Articles
  1. Forex Education

    How To Pay Your Forex Broker

    Three types of commissions are used in this market. Learn how to get the best deal.
  2. Forex Education

    Market Makers Vs. Electronic Communications Networks

    Learn the pros and cons of trading forex through these two types of brokers.
  3. Trading Systems & Software

    Backtesting: Interpreting The Past

    We offer some tips on this process that can help refine your current trading strategies.
  4. Trading Strategies

    Day Trading Strategies For Beginners

    From picking the right type of stock to setting stop-losses, learn how to trade wisely.
  5. Options & Futures

    Vertical Bull and Bear Credit Spreads

    This trading strategy is an excellent limited-risk strategy that can be used with equity as well as commodity and futures options.
  6. Forex Education

    Is Your Forex Broker A Scam?

    While the forex market is slowly becoming more regulated, there are many unscrupulous brokers who should not be in business.
  7. Forex Education

    Price Shading In The Forex Markets

    This practice puts brokers ahead of their clients, but it doesn't have to be a negative for traders.
  8. Forex

    What is arbitrage?

    Arbitrage is basically buying in one market and simultaneously selling in another, profiting from a temporary difference. This is considered riskless profit for the investor/trader. Here is an ...
  9. Technical Indicators

    What are the signs of a bear market rally?

    Read about some of the signs of a bear market rally, an unpredictable bull movement that takes place in the middle of a stronger downtrend.
  10. Fundamental Analysis

    Why are OTC (over-the-counter) transactions controversial?

    Learn more about over-the-counter transactions, and why OTC traders are considered riskier than traders working with larger market exchanges.

You May Also Like

Hot Definitions
  1. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  2. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  3. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  4. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  5. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  6. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
Trading Center