![]() ![]() For this reason, one of the main ways to avoid the pitfalls that come with slippage is to make use of limit orders instead. Slippage is a result of a trader using market orders to enter or exit trading positions. Reducing the Effects of SlippageĪlthough it is impossible to avoid the spread between entry and exit points completely, there are two main ways to mitigate them and minimise slippage: ![]() Stock traders can avoid slippage during volatile market conditions by not placing market orders unless they are completely necessary. For long trades, the ask price may be high, while for short trades, slippage may be due to the bid price being lowered. A trader may place a market order and find that it is executed at a less favourable price than they expected. ![]() Spread refers to the difference between the ask and bid prices of an asset. In the case of stock trading, slippage is a result of a change in spread. In this case, forex traders will likely execute trades at the next best asset price unless there is a limit order to stop the trade at a particular price. Slippage occurs during periods of high volatility, maybe due to market-moving news that makes it impossible to execute trade orders at the expected price. When trading forex online, slippage can occur if a trade order is executed without a corresponding limit order, or if a stop loss is placed at a less favourable rate to what was set in the original order. It is a term that is used by both forex and stock traders and, while the definition is similar for both types of trading, it occurs at different times for each of these forms of financial trading. Due to the fast pace of price movements in the financial markets, slippage may occur due to the delay that exists between the point of placing an order and the time it is completed. For instance, if you are buying the GBPUSD at 1.4040 but the order is filled at 1.4045, you have a price that is worse by 5 pips. On the other hand, a negative slippage occurs when an order is executed at a worse price than expected. For instance, if you are buying the EURUSD pair at 1.2050 but the order is executed at 1.2045, you have a price that is better by 5 pips. A positive slippage occurs when an order is executed at a better price than expected. Slippage can either be positive or negative. It is a phenomenon that occurs when market orders are placed during periods of elevated volatility, as well as when large orders are placed at a time when there is insufficient buying interest in an asset to maintain the expected trade price. In financial trading, slippage is a term that refers to the difference between a trade’s expected price and the actual price at which the trade is executed. Register Now Or Try Free Demo What is Slippage? ![]()
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