What Is Slippage?

Slippage is the difference between the price at which you expected an order to be filled and the price at which it was actually executed. It occurs because the market can move in the fraction of a second between your order being sent and being filled, or because there is not enough liquidity at the requested price to fill the full size. Slippage can be negative or positive, and understanding when it is likely helps you choose order types and timing that limit its cost.

How slippage happens

When you click "buy" at a displayed ask of 1.08512, several things have to happen: the order travels to the broker's server, the broker matches it internally or routes it to a liquidity provider, and a fill is returned. This takes milliseconds, but currency prices update many times per second in active conditions. If the best available ask has moved to 1.08515 by the time the order arrives, you are filled at 1.08515. That is 0.3 pips of negative slippage.

Liquidity is the second cause. A price on your screen is the best available price, but only a certain volume is available at that price. If your order is larger than that volume, the remainder is filled at the next best price, and your average fill is worse than the displayed quote. In the major pairs during active sessions this rarely affects retail-sized orders, but it can during thin periods or in less liquid pairs.

Positive and negative slippage

Whether a broker passes positive slippage on to clients depends on its execution model. Some fill at the requested price only when the market has moved in the trader's favour and pass on the improvement; others use asymmetric practices that should be questioned. A broker's execution policy is the place to check. What Is Trade Execution? explains the main models.

Measuring the cost of slippage

Slippage is measured in pips and converted to money using the pip value of the position.

Worked example: you place a market order to buy 1 standard lot of EUR/USD at a displayed ask of 1.08512 and receive a fill at 1.08515.

• Slippage: 1.08515 − 1.08512 = 0.00003 = 0.3 pips
• Pip value for 100,000 units: $10
• Cost: 0.3 × $10 = $3

On its own that is small. But consider a stop-loss during a news release: you are long 1 lot with a stop at 1.0820, the price gaps and the stop fills at 1.0808. Slippage is 12 pips, or $120, on top of the $300 loss already planned from a 30-pip stop. The pip calculator helps you translate any slippage figure into money for your position size.

Which order types are exposed

The trade-off is between certainty of execution and certainty of price. Market and stop orders guarantee that you get filled but not at what price; limit orders guarantee the price but not the fill. There is no order type that guarantees both, except a guaranteed stop, which is a product offered by some brokers at a cost.

When slippage is most likely

Major economic releases

In the seconds around interest rate decisions, employment reports and inflation data, prices can jump several pips at a time and liquidity providers widen their quotes or withdraw them briefly. This is the single most common source of large slippage. The economic calendar shows upcoming releases and their expected impact.

Market opens and gaps

The forex market closes on Friday afternoon New York time and reopens Sunday afternoon or Monday morning depending on your time zone. Events over the weekend can produce an opening price well away from Friday's close. Any stop order resting inside the gap is filled at the opening price, not at the stop level.

Thin liquidity periods

The daily rollover around 5 p.m. New York time, the gap between the New York close and the Asia-Pacific open, and public holidays in major financial centres all reduce liquidity. What Is Forex Liquidity? covers the daily pattern in detail, and the trading hours tool maps sessions to your local time.

Less liquid instruments

Exotic pairs and some crosses have thinner order books at all times, so a retail-sized order can move through several price levels.

Unscheduled news

Geopolitical events, surprise central bank statements and market rumours can produce the same conditions as a scheduled release, without the warning.

How to reduce slippage

1. Use limit orders for entries when timing is not critical. A limit entry removes negative slippage entirely, at the cost of possibly missing the trade.
2. Avoid placing market orders in the minutes around major releases. If you want to hold a position through a release, be in it well beforehand with a stop-loss sized to tolerate a wider fill.
3. Trade liquid pairs during liquid sessions. The London–New York overlap on major pairs generally offers the deepest liquidity available to retail traders.
4. Consider a guaranteed stop for event risk, where your broker offers one and the premium is acceptable.
5. Set a maximum deviation if your platform supports it. Some platforms, for example, allow a deviation limit on market orders on some execution types; if the price moves beyond the limit, the order is rejected rather than filled far away. See the the terminal platform page.
6. Check the broker's execution statistics and policy. A transparent broker publishes how it handles slippage, including whether positive slippage is passed on.

Slippage versus requotes

Slippage and requotes are two different responses to the same problem. With market execution, the broker fills the order at the current price and any difference appears as slippage. With instant execution, the broker may instead decline the order and return a new price, which is a requote; you then decide whether to accept. Neither is inherently better. Slippage gives certainty of fill; requotes give certainty of price but can leave you unfilled in a fast market. The execution type depends on the broker and account.

Slippage in strategy testing

Backtests and demo accounts often assume fills at the exact quoted price. A strategy that looks profitable under that assumption may not survive realistic slippage, especially if it trades frequently, uses tight stops, or relies on news events. Adding a conservative slippage assumption to backtests, and comparing demo fills with live fills after going live, is a sound habit. Demo Trading vs Live Trading discusses other differences to expect.

Key takeaways

• Slippage is the difference between the requested price and the filled price of an order, caused by price movement or insufficient liquidity at the quoted level.
• It can be negative or positive; a fair execution model produces both over time.
• Market and stop orders, including stop-losses, are exposed to negative slippage; limit orders are not, but may go unfilled.
• Slippage is most severe around major news, weekend gaps, thin sessions and in less liquid pairs.
• Its cost equals slippage in pips multiplied by the position's pip value.
• Limit entries, avoiding news windows, trading liquid pairs in liquid hours and using deviation limits all reduce exposure.