Slippage and Liquidity

Two causes

Movement: in the milliseconds between your click and the server, the price changed. Depth: your order was larger than the volume available at the best price, so part of it filled at the next price and the next. Retail sizes rarely hit the second cause in the majors; the first is what you will see.

Positive and negative

Slippage can improve your fill as easily as worsen it. A broker with market execution should show both, in roughly equal measure. If your fills only ever slip against you, the broker is either using asymmetric slippage, which strong regulators prohibit, or you are only trading in conditions where the movement is one way, which happens around news. Keep a record of expected versus filled prices for a month and look at the distribution.

Reducing it

• Trade liquid pairs in liquid hours.
• Avoid market orders in the minutes around scheduled releases.
• Use limit orders for entries when the exact price matters.
• Set maximum deviation on market orders where the platform allows.
• Consider a guaranteed stop on positions held through known events.

Slippage on stops

A stop loss slips more than an entry, because the moves that trigger stops are the fast ones. Build that into your sizing: assume the stop fills a few pips worse than its level in normal conditions, and much worse in a gap. The position size calculator lets you add a slippage allowance to the stop distance.

Key takeaways

• Slippage comes from movement during transmission or from thin depth.
• It should run both ways; one-way slippage is a warning sign.
• Time, pair and order type control most of it.
• Stops slip more than entries; size for it.