What is Slippage in Trading?

Slippage is the difference between the price at which a trader expects an order to execute and the actual execution price. Generally, it occurs because markets can move between the time an order is submitted and the time it is executed. For example:

• Suppose a trader places a market order to buy EUR/USD when the displayed price is 1.0850. 
• However, the order may actually execute at 1.0852. 
• The 0.0002 difference represents slippage.

It is worth mentioning that slippage can be:

Furthermore, slippage in forex execution or other market segments becomes more relevant when:

• Market volatility is high
• Liquidity is low
• Major economic data or central-bank announcements are released
• Large orders consume available liquidity
• Bid-ask spreads widen
• There is a delay between order submission and execution

Additionally, realise that a “market order” does not guarantee a specific execution price. In contrast, a “limit order” specifies the maximum price for a buy or minimum price for a sell, although the order may remain unfilled if that price is unavailable.

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