The Ultimate Guide to Slippage in Trading

Slippage is one of those trading realities every new trader gets to know sooner or later. Many times, it’s not a good introduction to this phenomenon, because slippage happening to you is normally a bad thing. That said, there are times when it works in your favor. But we will discuss this later.

Slippage, in simple terms, is the difference between the price you expect to pay when you place an order and the price you actually end up paying when the order is finalized. This is not to say you must wait for a long time – for frequent day traders, slippage becomes apparent in a matter of seconds or minutes.

In this article, we will explain what slippage is and how you can manage it. We will also tell you how to deal with slippage across different asset classes in which you may be trading.

How Does Slippage Work in Real Trading?

Imagine you click “buy” on EUR/USD at 1.0850, but by the time the trade executes, some minutes later, you’re filled at 1.0853. That’s a three-pip gap, which is known as slippage. On a standard lot, it costs you $30 instantly. It happens because markets don’t stand still. Liquidity, volatility, and your broker’s execution speed all play a role.

When we talk about liquidity, it’s a scenario in which there aren’t enough buyers or sellers at your chosen price, or when the market is moving too fast for your broker’s systems to keep up. This is when we see that your order slips to the next available level.

The diagram below illustrates the sequence of processes required for an order to be finalized. This demonstrates why it is no surprise that slippage can occur:

Sometimes that works in your favor, giving you a better entry, but often it doesn’t because you often end up worse off. That’s why learning to manage it is key to protecting your edge.

The same principle applies to stocks. If you try to buy Apple at $210 but rapid order flow pushes the fill to $210.50, you’ve slipped 50 cents per share. In the crypto world, where liquidity is fragmented across multiple exchanges, the effect can be even more damaging. You could place your Bitcoin order at $65,000, but it only fills at $65,150 in a thin market, resulting in a cost of $150 per coin.

Slippage Across Different Financial Assets

You need to keep a close eye on when and how you place orders. Slippage is an inherent part of the game, but understanding how to measure its cost in real terms makes it easier to incorporate risk management into your strategy. Let’s take a quick look at how slippage works across financial assets.

FOREX

You go long on GBP/USD at 1.2750 during the New York–London overlap, but volatility spikes after a surprise inflation release. Your market order fills at 1.2754 instead. That 4-pip slippage on a standard lot translates to a $40 cost.

FOREX is one of those assets that is affected by the news. When a major news announcement occurs (or even when the market opens after the weekend), price gaps appear, causing slippage.

For example, you placed a trade on Friday, and it was executed on Monday due to the price gap. This is demonstrated in the graphic below.

Crypto

You place a market buy on Bitcoin at $65,000 on a Sunday evening, when liquidity is thinner. By the time the crypto order executes, the price has moved to $65,300. The $300 difference per coin is slippage, and if you’re buying 2 BTC, that’s a $600 hit.

You can just imagine the potential slippage across exchanges for different trade sizes. The chart below is a hypothetical example that illustrates how price slippage increased between August 5th and 7th for BTC-USD, suggesting liquidity issues.

Stocks (and CFDs)

Imagine you want to take a long position on Nvidia stock when it’s trading at $180 per share. You place a market order to buy 50 contracts for difference (CFDs). However, right after a strong product launch announcement, trading activity on the stock market surges, and the price rushes. By the time your order is executed, the best available stock price is $180.30. Your order is filled at this higher level rather than the $180 you expected. That $0.30 gap per share represents slippage.

In this scenario, you’ve encountered $15 in negative slippage. While this may not seem significant, it reduces your edge and can add up over multiple trades, especially in volatile markets.

Commodities

Imagine you want to go long on gold when the price is $2,350 per ounce. You place a market order to buy 20 ounces. However, during a period of extreme volatility after some bad inflation data, the commodity market moves quickly.

By the time your order is processed, the best available price has risen to $2,352. Instead of being filled at $2,350, your order is executed at $2,352. The $2 per ounce difference is the slippage.

In this case, you’ve experienced $40 of negative slippage, meaning your trade opened at a less favorable price than intended, which narrows your potential profit margin.

So, the lesson across all markets is the same: the more liquid and orderly the market, the less slippage you’ll face. The thinner or more chaotic it is, the more you should prepare for your orders to fill at prices at which you didn’t plan.

Positive vs. Negative Slippage

Slippage isn’t always the enemy. Sometimes it can work in your favor. However, you should know that, although there is no single source of truth, we can make an educated guess that negative slippage happens twice as often as positive slippage.

How do we know this? US brokers regulated by the NFA/CFTC are required to publish execution quality statistics. Those often show roughly 60–70% of trades filled at the quoted price, 20–30% experiencing negative slippage, and 10–15% getting positive slippage.

What you should know is that negative slippage occurs when your order fills at a worse price than you intended. On a standard lot, a four-pip slip costs you $40 before the trade even gets going.

Positive slippage, though rarer, works in your favor. Suppose you’re long EUR/USD at 1.0850, but extra liquidity drives your fill down to 1.0848. That two-pip improvement saves you $20 instantly on a standard lot.

Both outcomes are part of live trading. The key is recognizing that slippage reflects how fast markets move and how much liquidity is available at the moment your order hits. Sometimes you’ll pay a little extra, sometimes you’ll get an unexpected advantage, but over the long run, your trading strategy should be robust enough to handle either.

What Are the Main Causes of Slippage?

Slippage usually comes down to three forces:

• liquidity

• volatility

• execution speed

If you’re trading a highly liquid pair like EUR/USD during peak London hours, orders tend to fill right on time. But if you happen to be trading in a thin market, such as an exotic currency pair or a small-cap stock, the lack of buyers and sellers means your order can only be filled at the next available price.

Volatility, as we’ve indicated, adds fuel to the fire. Big events, such as a Fed rate decision or nonfarm payrolls, can move markets in seconds, creating significant gaps that push fills away from your intended entry.

Broker speed also matters. A fraction of a second in execution time can decide whether you’re slipped two pips or twenty.

Timing plays its role, too. Slippage is far more common during out-of-hours sessions, when liquidity dries up and spreads widen.

In FOREX, that could be trading during the Asian session on a pair dominated by European flows. In stocks, it’s common right at the open, when pent-up orders from overnight news flood the market. Even cryptocurrency, which trades 24/7, is not immune; weekend volumes tend to be thinner, making large orders prone to slippage.

Which Order Types Are Most Affected by Slippage?

Not all order types face slippage in the same way:

Market Orders

• Most exposed to slippage because they promise immediate execution at the best available price.

• Speed comes at a cost: if liquidity is thin or volatility spikes, your order will be filled at the available price, often a few pips or ticks worse than expected.

• Harshest slippage often occurs following news releases, when spreads widen dramatically.

Limit Orders

• Guarantee your price but not your execution.

• If the market gaps past your level without trading through it, your order won’t be filled.

• Advantage: no slippage

• Risk: You may miss the trade entirely

Stop Orders

• Fall somewhere in the middle.

• Once triggered, they turn into market orders, which expose them to slippage.

• A buy stop above resistance can slip higher if the price gaps through your level.

• A sell stop below support can slip lower if momentum accelerates quickly.

The takeaways are simple: market orders give certainty of execution but leave you open to slippage; limit orders eliminate slippage but may leave you on the sidelines; and stop orders can still slip in fast markets because they turn into market orders once triggered. Knowing when each order type is most vulnerable helps you pick the right tool for the conditions you’re trading.

How Can I Reduce or Manage Slippage?

You can’t eliminate slippage, but you can stack the odds in your favor. The first step is timing. Trade during the most liquid sessions when spreads are tight and order books are deep. For FOREX, that’s the London and New York overlap; for stocks, it’s usually mid-session, once the opening volatility has settled. Thin hours, like late in the Asian session or low-volume crypto weekends, are when slippage bites hardest.

Order choice matters, too. Market orders guarantee a fill but leave you exposed to whatever price the market serves up. Limit orders, on the other hand, ensure your price, though you risk missing the trade if the market skips past your level. Some brokers also offer guaranteed stop orders, which can lock in your exit price even in gapping conditions, though they usually come with a premium.

Finally, be mindful of significant news events. Central bank decisions, job reports, and earnings releases can move markets in seconds, creating precisely the kind of spikes where slippage is most pronounced. Unless your strategy is designed explicitly for trading those events, the safer move is to wait until volatility subsides and liquidity returns. By combining good timing, smart order types, and disciplined planning, you can keep slippage from eroding your edge.

What is My Broker’s Role in Slippage?

In retail trading, not every broker handles slippage the same way, and that can make a big difference to your trading results. Some of the best brokers set an apparent “slippage tolerance” around your order. If the price moves beyond that band before your trade is executed, the broker may reject the order or give you the option to cancel it. That way, you won’t be forced to trade at a price you didn’t intend to accept.

Other brokers, however, are less flexible, and truthfully, less good. They might automatically fill your order at the next available price, even if the move is well outside your expectations. In fast-moving markets or during thin liquidity sessions, this can mean a much larger loss to swallow. Some brokers also restrict the ability to set maximum slippage parameters on their platforms, further reducing your control.

This is why it’s important for you to read a broker’s execution policy carefully. The way slippage is handled, whether with client-friendly safeguards or with more rigid, broker-favorable rules, can have a direct impact on costs, trade precision, and how your overall strategy performs in the real world of trading.

Slippage by Execution Models

In retail trading, brokers don’t all treat slippage the same, and the difference often comes down to their execution model.

Market-maker brokers

Market makers take the opposite side of client trades, meaning your orders are filled internally rather than passed directly into the wider market. Because they control execution, they can choose how much slippage they are willing to allow. As we’ve mentioned, some market makers are more flexible, allowing you to cancel if the price moves too far from your request. Others may simply fill the order at the next available price, even if it’s significantly worse.

Straight Through Processing (STP) brokers

STP brokers pass your orders directly to their liquidity providers. Slippage here is more impacted by market depth and liquidity. Many STP brokers allow you to set a maximum deviation (sometimes called “slippage control”), so if the price moves beyond your chosen band, the order is cancelled rather than executed. This gives you more control.

Electronic Communication Network (ECN) brokers

ECN brokers connect you directly to an electronic marketplace where banks, institutions, and other traders post bids and offers. Execution in this trading form is highly transparent; however, you receive the price available in the book at the moment your order is executed.

In reality, that means slippage is almost inevitable in volatile or illiquid conditions, but it’s “true market slippage,” not influenced by broker intervention. ECN models hardly ever allow you to cancel after the fact; instead, you manage risk by using limit orders.

How Does Slippage Affect Risk Management?

It should be easy to see how slippage can throw off your risk management if you don’t plan for it. A stop-loss that should have closed you at 1.1000 might actually fill at 1.1005 in a fast-moving FOREX market, turning a controlled 20-pip loss into 25 pips.

That extra hit might seem like something you can absorb, but repeat it over dozens of trades, and it adds up quickly. Scalpers feel this pain the most because they’re chasing small, frequent gains. A few pips of negative slippage can wipe out the edge of a strategy that relies on tight stops and fast exits.

Swing traders, with wider targets and stops, are less affected, but they still need to be keenly aware of it, especially when holding through volatile events.

The best approach is to build slippage into your risk model. If you’re willing to risk $100 per trade, size your position as if slippage might push that to $110 or $120. It’s a small cushion that keeps you from breaking your own rules.

In the long run, treating slippage as part of the cost of doing business helps you stay disciplined and keeps your capital safe when markets move faster than your orders can keep up.

How Can I Test for Slippage?

You may wonder whether your broker is treating you fairly when it comes to slippage. The best way to know for sure is to gather data in a live account. You can do this as a one-off test, or, better yet, make it part of your ongoing trading routine.

Here’s how it works:

• Buy slippage = quoted ask price – execution price

• Sell slippage = execution price – quoted bid price.

  For example, take three buy-side trades:

And three sell-side trades:

You then calculate the average slippage across a large number of orders, ideally over several weeks and across multiple markets. This way, you’ll see if your broker is giving you a crack at fair execution.

If everything is fair, you should expect positive and negative slippage to balance out, averaging close to zero. But if you find that negative slippage is showing up much more often, that’s a problem of which you need to be aware.

Running this kind of random test costs money because you’re trading live, but it’s money well spent especially if you’re trading frequently or in large volumes. Over time, it can save you from trading with a broker who is not working in your best interests.

What Are the Biggest Myths About Slippage?

Slippage has built up a reputation that isn’t always fair. Clearing up the myths can help traders approach it with the right mindset:

Myth 1: Slippage only works against you

Reality: Positive slippage exists, too. You can get a better price than requested when liquidity lines up in your favor. Traders often remember the bad fills and overlook the good ones.

Myth 2: Slippage means your broker is cheating you

Reality: While shady brokers exist, most slippage comes from fast-moving markets and order book depth and liquidity conditions. It’s usually not manipulation.

Myth 3: Slippage can be avoided entirely

Reality: Slippage is a common occurrence in every market, including FOREX, stocks, crypto, and more. The goal isn’t to eliminate it, but to minimize the damage by trading during high-liquidity sessions, using smart order types, and factoring it into your risk plan.

The goal isn’t to eliminate it but to minimize its damage by trading during liquid sessions, choosing smart order types and baking it into your risk plan. Understanding these realities turns slippage from a mysterious threat into just another cost of doing business in the markets.

Final Thoughts

You should get used to the fact that slippage is part of every trader’s reality. No matter how carefully you plan, markets move fast and orders don’t always fill where you want them. There is a global trading apparatus out there over which you have no control.

The good news is that slippage is manageable once you understand what causes it and how to protect yourself. Trade during liquid sessions, use order types that suit the conditions, and always factor a margin of slippage into your risk model.

If you are a scalper, a few pips can make or break a strategy, while swing traders can often absorb the difference; but remember, in both cases, discipline matters. Slippage can hurt when it goes against you, but it can also hand you better entries when the market shifts in your favor.

What we would always say is that, in the end, it’s not about trying to avoid slippage completely – this would be impossible. It’s more about treating it like any other trading cost. Build it into your plan, respect its impact, and you’ll keep your strategy fit for purpose even when the market doesn’t give you the exact fill you wanted.