Slippage in trading is the difference between the price you expected and the price your order actually filled at. It happens when the market moves, or there is too little volume at your price, in the moment between triggering an order and its execution. It can work for you or against you, and it matters most on stops.
Quick answer: what is slippage in trading?
Slippage is the gap between the price you requested or set and the price you were filled at. Negative slippage means a worse fill, positive slippage a better one. It is most common on market and stop orders during news, at the market open and in thin trading hours, and it can make a loss larger than planned.
What slippage in trading is, and why it happens
Every fill needs someone on the other side at a price. When prices are moving quickly, or few orders are resting near the current price, your order takes the next price available, and that may not be the one on your screen. We cover how market, limit and stop orders behave in our guide to market, limit and stop orders explained; here we focus on what that behaviour costs.
The main causes are:
- Volatility: prices change between your click and the fill, typically around scheduled data, which our guide on how to use an economic calendar helps you plan around.
- Thin liquidity: few resting orders near the price, as explained in our guide to liquidity in trading and why it matters.
- Gaps: the market opens away from the last close, skipping every price in between.
- Size: a large order can use up the volume at one price and fill the rest at worse ones.
Slippage is not the same as the spread
The spread is the known gap between the buy and sell price, visible before you trade; we cover it in what the bid-ask spread costs you. Slippage is the unknown part: the extra distance between the price you expected and the fill. In fast markets the two often arrive together, because spreads widen just as prices jump.
Negative vs positive slippage
Slippage is not always bad. If you buy at market and the price drops slightly before your order fills, you get a better price. Whether a provider passes on positive slippage as well as negative is worth checking in its order execution policy.
| Order | Negative slippage | Positive slippage |
|---|---|---|
| Buy at market | Filled higher than shown | Filled lower than shown |
| Sell at market | Filled lower than shown | Filled higher than shown |
| Sell stop (exit a long) | Filled below the stop | Rare; filled at or above the stop |
| Limit order | None: fills at your price or better | Possible; the cost is it may not fill |
Which orders are exposed to slippage?
Market orders accept the next price, so they are always exposed. A limit order cannot fill at a worse price, but in a fast market it may not fill at all, which is its own risk when you are trying to get out.
Stop orders are where slippage hurts most. As FINRA explains in its guide to stop orders in volatile markets, a stop becomes a market order once its price is reached, and the fill can be significantly different from the stop price. That is not a fault in the stop; it is how the order works.
A real example of thin liquidity
On 7 October 2016, sterling fell around 9% against the US dollar in early Asian trading before recovering much of the move. The Bank for International Settlements’ report on the sterling flash event found that the time of day played a significant role and that stop-loss orders being executed as the pound fell also had an impact. Stops triggered in a move like that can fill far from where they were set.
How to reduce slippage
You cannot remove slippage, but you can choose when to accept it. These are the habits we use:
- Avoid entries in the minutes around major releases unless that volatility is part of your plan.
- Trade the busiest hours for your market. Liquidity is usually deepest when major sessions overlap.
- Use limit orders for entries where missing the trade is acceptable.
- Think before holding over weekends. Our gap trading strategy guide shows how opening gaps can skip a stop.
- Keep stops away from obvious clusters, where many orders trigger at once; see our article on why stop orders cluster at obvious levels.
What a guaranteed stop does, and what it costs
Many UK spread betting and CFD providers offer a guaranteed stop loss: the trade closes at your exact level even through a gap or fast move. It is a real product, not a loophole, and you pay for it, typically through a premium charged if the stop is triggered or a wider cost on entry.
Providers usually require it to sit a minimum distance from the current price and do not offer it on every market, so read the terms. It caps slippage on that exit; it does not make a badly placed stop a good one.
Worked example: budgeting for slippage
This example is hypothetical. On a £6,000 account we risk 1% per trade, so £60. We buy an index at 8,200 with a stop at 8,170, a 30-point stop, so the stake is £2 per point, worked out as in our guide on how to calculate position size for spread bets and CFDs.
A data release sends price through the stop and it fills at 8,158, 12 points of slippage. The loss is 42 points, or £84, instead of £60. Spread bets and CFDs are leveraged, which is why a few points of slippage can add so much to the loss in pounds.
A sensible fix is to plan for it. If your records show typical slippage of a few points on stops in that market, add that to the stop distance when sizing. With a 5-point allowance, £60 divided by 35 points gives about £1.71 per point, and the same slip now costs closer to plan.
Common mistakes with slippage
- Assuming a stop fills at its price. A normal stop limits the loss in most conditions, not all.
- Leaving it out of backtests. Results look better than live trading will be; our guide on how to backtest a trading strategy without fooling yourself covers adding costs.
- Not recording fills. Log requested and filled prices in your trading journal for beginners to see your real slippage.
- Using mental stops to “avoid” it. You still exit at market, only later and with hesitation.
Frequently asked questions
Is slippage the broker’s fault?
Usually not; it is how markets fill orders when prices move fast or liquidity is thin. If you see frequent slippage against you in calm markets but never in your favour, raise it with the provider and ask for its order execution policy.
Do limit orders have slippage?
A limit order cannot fill at a worse price than its limit, so it has no negative slippage. The trade-off is that it may not fill at all if price moves away quickly.
Does slippage happen in forex?
Yes. Major pairs are usually liquid, but slippage still appears around big data releases, during quiet hours and when the market reopens after the weekend.
Is a guaranteed stop worth paying for?
It depends on the market, the timing and the premium. It can make sense around major events or over weekends, while many traders accept normal stops in liquid markets during busy hours.
Next steps
Slippage is one cost inside a wider risk plan, set out in our guide to building a rules-based risk model. For stop placement itself, read where to place a stop loss with price action.
A rules-based risk model and knowing when not to trade are both covered in our price action trading course, and the basics section is free to start.
This article is for education only and is not financial advice. Trading leveraged products such as CFDs and spread bets carries a high risk of losing money.
