Slippage

What slippage means

Slippage is the difference between the price you expected when you sent an order and the price at which it was actually filled. If you click buy at 1.1000 and the order fills at 1.1002, you have experienced two pips of negative slippage. If it fills at 1.0999, you have experienced positive slippage, sometimes called price improvement.

It is a normal feature of electronic markets rather than a sign of misconduct. Prices move continuously, and a short gap always exists between the moment you see a quote, the moment your order reaches the broker or exchange, and the moment it is matched. If the market moves in that gap, or if there is not enough volume at your price, the fill differs from the quote.

Slippage affects every kind of trader: a long-term investor buying a thinly traded share, a day trader scalping a currency pair, or a swing trader whose stop-loss triggers during a news release. Its size varies enormously with market conditions, order type and broker execution.

How it works

Slippage has two main causes.

Latency: time passes between your decision and the fill. In a fast market even a fraction of a second can move the quote.
Liquidity: the market may not hold enough volume at the displayed price. A large order then consumes the best offers and moves on to worse ones. The average fill is worse than the first quote.

Order type determines how slippage is handled.

A market order accepts the next available price, so it nearly always fills but at an uncertain level.
A limit order sets a worst acceptable price. It avoids negative slippage but may not fill at all.
A stop order turns into a market order once the stop level is hit, so it can fill beyond the stop, especially in a gap.
A stop-limit order combines the two, which caps the price but may leave you with no exit.

Some brokers offer a maximum deviation or slippage tolerance setting. If the price has moved more than your tolerance by the time the order arrives, the order is rejected or re-quoted instead of filled. Other brokers use a last-look process, where the dealer may decline an order after it is sent. How a firm handles positive and negative slippage, whether symmetrically or not, depends on its execution model and is disclosed in its order execution policy.

A worked example

These numbers are illustrative only. A trader wants to buy 5 standard lots of EUR/USD, which is 500,000 units, just before a data release. The quote is 1.1000 / 1.1001, and the trader sends a market buy.

The order reaches the market a fraction of a second after the release. The best offer is now 1.1004 and the broker fills the first 200,000 units at 1.1004.
The next 200,000 units fill at 1.1006 and the last 100,000 at 1.1009.
Average fill = (200,000 × 1.1004 + 200,000 × 1.1006 + 100,000 × 1.1009) ÷ 500,000 = (220,080 + 220,120 + 110,090) ÷ 500,000 = 550,290 ÷ 500,000 = 1.10058.
Expected price was 1.1001, so slippage = 1.10058 - 1.1001 = 0.00048, or 4.8 pips.
Cost in dollars = 4.8 pips × 10 USD per pip per standard lot × 5 lots = 240 USD.

A limit order at 1.1003 would have avoided most of that, but it might have been left unfilled if price kept rising.

Now a stop-loss case. A long position has a stop at 1.0950. Over the weekend the market gaps and opens at 1.0900. The stop triggers and fills at 1.0900, which is 50 pips beyond the stop. The loss is larger than planned.

Why it matters

Slippage is a real trading cost that does not appear on a fee schedule. For a strategy with small targets, a pip of slippage on each side can cancel a large part of the expected profit. It also affects risk: a stop-loss is a request to exit, not a guarantee of a price, so the planned loss may be exceeded.

Differences between brokers can be significant. Brokers with deep liquidity and fast infrastructure tend to deliver tighter fills, while those with slower routing or limited liquidity providers show more variation. A broker's order execution policy and its published statistics, where available, give a clue. Positive slippage does exist: in a rising or falling market, orders can fill better than quoted, and a fair policy passes some of that on to the client.

How to use it in practice

Read the broker's execution policy to see whether slippage is symmetrical and whether last look is used.
Prefer limit orders for entries where price matters more than certainty of a fill.
Avoid placing market orders seconds before major news, when spreads widen and liquidity thins.
Trade sizes that the market can absorb. Split large orders into smaller ones if necessary.
Test the platform on a demo account and then with small live trades, and record the difference between the quoted and the filled price.
Add an allowance for slippage when calculating stop distance and position size.
Consider guaranteed stops where offered, and weigh their extra cost against the protection.

Common mistakes and misconceptions

Assuming slippage is always the broker's fault. Market movement and thin liquidity cause most of it.
Thinking a stop-loss fixes the exit price. In fast markets or gaps, the fill can be much worse.
Ignoring positive slippage. A fair broker will sometimes fill you better than quoted.
Using market orders for large trades in illiquid products.
Comparing brokers only by spread. Fill quality can matter more than a fraction of a pip.
Setting a very tight maximum deviation and then being surprised by many rejected orders.

Risks and limitations

You cannot eliminate slippage, only manage it. Limit orders remove the price uncertainty but add execution risk. Guaranteed stops cost extra and may not be available in all markets. Slippage can be extreme during gaps, flash crashes and illiquid sessions, and with leverage the financial impact is magnified. Backtests that assume perfect fills tend to overstate results. CFD trading carries a high risk of rapid loss, and slippage is one reason an apparently small move can turn costly.

How Brokeli looks at it

Brokeli reviews what brokers disclose about order execution: the execution model, whether last look or requotes apply, whether slippage is symmetrical, and what protections such as guaranteed stops exist. These facts come from the published research snapshot and legal documents. We do not claim to measure live fill quality for every account and we encourage readers to test with small size.

Frequently asked questions

What is slippage in trading?

It is the gap between the price you expected and the price your order actually filled at. It happens because markets move between order entry and execution, or because there is not enough volume at the quoted price. It can be negative, positive or zero.

What causes slippage?

The main causes are market volatility, thin liquidity and latency. Large orders, news releases, market opens and gaps all increase the chance that the fill differs from the quote. Order type also matters, as market and stop orders are exposed to it, while limit orders are not.

How can I reduce slippage?

Use limit orders where possible, avoid trading in the seconds around major news, choose liquid instruments and trading hours, and keep order sizes reasonable. Check your broker's execution policy and test with small trades. You can lower slippage, but not remove it completely.

Is positive slippage real?

Yes. If the market moves in your favour between order and fill, you may receive a better price than quoted. Execution policies differ on whether positive slippage is passed on, so check whether your broker treats gains and losses from slippage symmetrically.

Does slippage apply to stop-loss orders?

Yes. A stop-loss usually becomes a market order once triggered, so it can fill beyond the stop price in fast markets or when the market gaps. Some brokers offer guaranteed stops at a fee, which fix the exit price, though conditions apply.