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. Extended Trading

    Trading conducted on electronic exchanges either after regular ...
  4. Ask

    The price a seller is willing to accept for a security, also ...
  5. Bid

    1. An offer made by an investor, a trader or a dealer to buy ...
  6. Transaction Costs

    Expenses incurred when buying or selling securities. Transaction ...
Related Articles
  1. The forex market, unlike other exchange-driven markets, has a unique feature that many market makers use to entice traders.
    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. Fundamental Analysis

    What is the difference between market capitalization and equity?

    Understand the difference between market capitalization and equity, two primary measurements used to evaluate the worth of a company.
  10. Fundamental Analysis

    What is the first day of the first quarter?

    The first day of companies' fiscal years varies based on industry cycles. The timing is especially important because annual reports can have unexpected effects.

You May Also Like

Hot Definitions
  1. Scarcity

    The basic economic problem that arises because people have unlimited wants but resources are limited. Because of scarcity, ...
  2. Trust Fund

    A trust fund is a fund comprised of a variety of assets intended to provide benefits to an individual or organization. The ...
  3. Christmas Tree

    An options trading strategy that is generally achieved by purchasing one call option and selling two other call options at ...
  4. Christmas Club

    A short-term savings account that usually pays out the full account balance to its account holders once each year, right ...
  5. Boston Snow Indicator

    A market theory that states that a white Christmas in Boston will result in rising stock prices for the following year. For ...
  6. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
Trading Center