What Is Slippage?
Slippage occurs when an order is executed at a different price than initially requested. This discrepancy typically arises due to rapid market movements or delays in order processing, often during periods of high volatility or market gaps.
Causes of Slippage in Trading
- Market Volatility: Sudden price fluctuations can bypass stop orders before execution.
- Market Gaps: Sharp price jumps with minimal trading activity (e.g., after weekends or news events).
👉 Master trading strategies to mitigate slippage
Slippage Example: GBP/USD Trade
- Scenario: A short position on GBP/USD with a stop at 1.360.
- Friday Close: Price at 1.350.
- Sunday Open: News spikes the price to 1.365, triggering the stop at a worse rate.
Pros and Cons of Slippage
Advantages
- Positive Slippage: Orders may fill at better prices if the market moves favorably during execution.
Disadvantages
- Negative Slippage: Stop orders execute at worse prices, increasing losses.
| Prevention Method | Description |
|---|---|
| Guaranteed Stop | Ensures execution at the set price (premium may apply). |
| Limit Orders | Caps the maximum/minimum price for trade execution. |
How to Avoid Slippage
- Use guaranteed stops (may incur fees).
- Trade during high-liquidity hours to reduce gaps.
- Monitor economic calendars for high-impact news.
👉 Explore advanced slippage prevention tools
FAQ: Slippage in Trading
Q: Can slippage be entirely eliminated?
A: No, but risks can be minimized with guaranteed stops and strategic timing.
Q: Is slippage always negative?
A: No—positive slippage can improve trade outcomes.
Q: Which markets are most prone to slippage?
A: Forex and cryptocurrencies due to 24/7 trading and volatility.
Key Takeaways
- Slippage reflects execution price variance.
- Mitigate risks with stops, liquidity awareness, and news tracking.
- Both positive and negative slippage can impact trades.
Expand your expertise with IG Academy’s courses on volatility management.
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