Slippage

Loading the player...

What is '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.

BREAKING DOWN '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. At The Highest Possible Price

    A type of security trading designation that instructs a brokerage ...
  2. Buy Limit Order

    An order to purchase a security at or below a specified price. ...
  3. Stock Ahead

    A situation in which an order is placed, but not executed, because ...
  4. Inside Quote

    The best bid and ask prices offered to buy and sell a security ...
  5. Market Order

    An order that an investor makes through a broker or brokerage ...
  6. Contingent Order

    1. An order involving the simultaneous execution of two or more ...
Related Articles
  1. Forex Fundamentals

    Explaining Slippage

    Slippage occurs when a trade is executed at a different price than what was expected.
  2. Investing

    How To Start Trading: Order Types

    The types of orders you use can have a large effect on your trading performance, so understanding the different order types is important to your success.
  3. Forex Education

    Intermediate Guide To MetaTrader 4 - Order Types

    Traders have the option of placing different order types using the MT4 platform. Market OrderA market order is the most basic type of trade order and is used to buy or sell a security at the ...
  4. Trading Strategies

    Pairs Trading: Risks

    Although pure arbitrage is essentially a risk-free strategy, pairs trading (either as relative value arbitrage or StatArb) involves certain risks, including model risk and execution risk. Model ...
  5. Professionals

    TYPES OF ORDERS

    Order Execution Most customer orders, which are market orders or executable limit orders, will be routed electronically to the trading post for automatic execution. The electronic system bypasses ...
  6. Professionals

    Types Of Orders

    Investors can enter various types of orders to buy or sell options. Some orders guarantee that the investor’s order will be executed immediately. Other types of orders may state a specific ...
  7. Professionals

    Types of Securities Orders

    Securities Orders
  8. Professionals

    Order Types

    NASAA Series 65: Section 17 Order Types. In this section market order, limit order, stop order and stop limit order.
  9. Professionals

    Types Of Orders

    Investors can enter various types of orders to buy or sell securities. Some orders guarantee that the investor’s order will be executed immediately. Other types of orders may state a specific ...
  10. Professionals

    Types Of Orders

    Investors can enter various types of orders to buy or sell securities. Some orders guarantee that the investor’s order will be executed immediately. Other types of orders may state a specific ...
RELATED FAQS
  1. What's the difference between a market order and a limit order?

    Buy and sell trades with market orders at the present stock price and execute limit orders if the stock price falls within ... Read Answer >>
  2. What is the difference between a stop and a market order?

    Learn about market orders and stop orders, how they are used and executed, and the main difference between stop orders and ... Read Answer >>
  3. How do I set a strike price in foreign exchange trading?

    Learn about the different order types foreign exchange traders can use to manage positions at certain strike prices and how ... Read Answer >>
  4. How do financial advisors execute trades?

    Understand how financial advisors normally execute an investor's trades. Learn about the different type of markets and exchanges ... Read Answer >>
  5. How do I place a limit order online?

    Learn how a limit order is placed, the types of stocks it is most useful for and the specifications placed with it to suit ... Read Answer >>
  6. Why is the execution of a limit order not guaranteed?

    Using a limit order to buy a stock can be helpful in securing certain prices, but the mechanics of a limit order can decrease ... Read Answer >>
Hot Definitions
  1. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  5. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  6. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
Trading Center