What Is Slippage in Trading?
Slippage occurs when your order fills at a different price than you intended. You click buy at $100, but your order fills at $100.25. That $0.25 difference is slippage.
It happens in all markets—stocks, futures, forex, crypto—whenever live trading meets real market conditions.
Why Does Slippage Happen?
Fast-Moving Markets
Prices change constantly. Between when you click and when your order reaches the exchange, prices can move—especially during volatile periods.
Low Liquidity
If there aren’t enough buyers/sellers at your desired price, your order fills at the next available price level. Thin markets = more slippage.
Large Order Sizes
Big orders may exhaust available liquidity at one price, forcing partial fills at multiple price levels. This is called “walking the book.”
Market vs. Limit Orders
Market orders prioritize execution speed over price, guaranteeing fills but accepting slippage. Limit orders set maximum prices but risk not filling.
Slippage Examples
You want to buy ES at 5000.00:
- Positive slippage: Fills at 4999.75 (you got a better price)
- Negative slippage: Fills at 5000.50 (you paid more)
- Zero slippage: Fills exactly at 5000.00 (rare)
During news events like Non-Farm Payroll reports, slippage can be extreme as markets gap violently.
How to Minimize Slippage
Use Limit Orders
Set the maximum price you’ll accept. You might not get filled, but you won’t pay more than intended.
Trade Liquid Markets
ES and NQ have deep liquidity. Obscure contracts with wide bid-ask spreads have more slippage.
Avoid Major News
Don’t trade during Fed announcements, NFP, CPI releases. Wait 15-30 minutes for volatility to settle.
Smaller Position Sizes
Large orders move markets. Break big positions into smaller chunks to reduce impact.
Slippage vs. Spread
Don’t confuse them:
- Spread: Difference between bid/ask (the cost of trading)
- Slippage: Difference between expected and actual fill price
Tight spreads reduce potential slippage, but don’t eliminate it.
Slippage in Prop Firm Evaluations
Prop firms factor slippage into performance. Your backtest shows $500 profit, but live trading with slippage yields $450.
Account for 0.5-2 ticks of slippage per trade when planning risk management.
The Bottom Line
Slippage is unavoidable in live trading. Understanding what causes it helps you minimize its impact through smart order types, market selection, and timing.
Budget for slippage in your trading plan—it’s part of the cost of doing business.
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