What Is Slippage in Trading? Causes, Examples and How to Reduce It

Search Fintrev

Search our guides, reviews and glossary.

Slippage in trading is the difference between the price you expect when you place an order and the price at which the order actually executes. It applies to stocks, forex, futures, options and crypto alike. Slippage can work against you (negative), in your favor (positive) or not at all (zero). It shows up most often when market orders meet fast-moving prices or thin liquidity.

How Slippage Works

When you send an order, it does not execute at the quote on your screen. It executes against whatever prices are available on the exchange, ECN or dealer at the moment it arrives. Between the click and the fill, even if that gap is milliseconds, the bid and ask can move. The order then fills at the best price available at that moment, which may be better than, equal to or worse than the price you saw.

For a buy order, the relevant price is the ask. For a sell order, it is the bid. Slippage therefore appears in four ways:

• Negative, buying: the ask rises before a long position is filled.
• Negative, selling: the bid falls before a short position (or a sale) is filled.
• Positive, buying: the ask falls before a long position is filled.
• Positive, selling: the bid rises before a short position is filled.

A second mechanism is depth. A quote is valid only for a certain size. If your order is larger than the volume available at the best price, the remainder fills at the next price levels in the order book, and the average fill price drifts away from the quote. This is why large orders can slip even in a calm market.

Slippage Formula

For a buy order:

Slippage = Execution price − Expected price

For a sell order, reverse it:

Slippage = Expected price − Execution price

With this sign convention, a positive result is a cost (negative slippage) and a negative result is an improvement (positive slippage). To compare trades of different sizes or assets, express it as a percentage or in basis points:

Slippage % = (Slippage ÷ Expected price) × 100

One basis point equals 0.01%, so a 0.05% slippage is 5 bps. Total slippage cost equals slippage per unit multiplied by the number of units traded.

Examples of Slippage in Trading

Hypothetical stock example. A stock is quoted at $50.00 bid / $50.03 ask. You place a market order to buy 200 shares, expecting to pay $50.03. Before your order reaches the market, the quote moves to $50.06 / $50.09, and you are filled at $50.09.

• Slippage per share: $50.09 − $50.03 = $0.06
• Total slippage: $0.06 × 200 = $12.00
• Percentage: $0.06 ÷ $50.03 × 100 ≈ 0.12%, or about 12 bps

Hypothetical forex example. You buy one standard lot (100,000 units) of EUR/USD with an expected fill at 1.1000 and receive 1.1003. That is 3 pips of negative slippage. For a pair quoted in US dollars, one pip on a standard lot is worth $10, so the slippage costs $30. On a mini lot (10,000 units) the same 3 pips would cost $3. A position size calculator helps translate pips into account currency for other pairs and lot sizes.

A 2% slippage example. If you place an order when shares trade at $100 and pay $102, you have 2% negative slippage. Selling at $98 when you expected $100 is also 2% negative slippage.

Slippage in Forex

In forex, slippage usually occurs when a market order fills, or when a stop-loss closes a position at a price different from the level set in the order. A stop-loss order is a trigger, not a guaranteed price: once the stop level is reached, it becomes a market order and fills at the next available price. In a fast move, or when the market opens with a gap after a weekend, that fill can be well beyond the stop. The stop level determines when you exit; the fill price determines what the exit costs.

Slippage risk in currency markets rises around major economic releases and central bank decisions, and outside the most active trading hours, when fewer participants are quoting prices. On some dealing-desk accounts, a moved price can produce a requote (the dealer offers a new price that you accept or reject) instead of a slipped fill.

Slippage risk increases when…

• Volatility spikes around earnings, economic data or other scheduled events
• Trading volume is low and fewer buyers and sellers are active
• An order is large relative to the liquidity at the quoted price
• Market or stop orders are used instead of limit orders
• Trading takes place outside regular market hours

How to Reduce Slippage

Use limit orders. A buy limit fills only at your price or lower; a sell limit fills only at your price or higher. That removes negative slippage on the entry or exit. The cost is execution risk: if the price moves away, the order may sit unfilled or fill only partly, and you can miss the trade entirely.

Set a slippage tolerance. Some platforms let you cap the acceptable deviation, often as a percentage, in points or in pips. A “max slippage” setting tells the system to reject or cancel the order if the fill would fall outside that range. A tight setting protects price but causes more rejected orders; a loose one fills more reliably at a worse price. Automated strategies on platforms such as MetaTrader typically pass a similar maximum deviation with each order.

Trade in calmer conditions. Avoiding the minutes around major announcements and the thinnest trading sessions reduces how far prices can move between order and fill.

Choose liquid instruments and size orders sensibly. Heavily traded stocks and major currency pairs generally have more volume at each price. Breaking a large order into smaller pieces limits how deep it reaches into the order book.

Slippage vs. Spread and Other Confusions

Spread is the known gap between bid and ask at the moment you trade. A market buy pays the ask, so you cross the spread even if the quote never moves. Slippage is the additional, unknown change between your expected price and your fill. Both are trading costs, and they add up, but you can see the spread before trading and can only measure slippage afterward.

Slippage is also distinct from commissions and swap or financing charges, which are fees set by the broker. In crypto trading, particularly on decentralized exchanges and thinly traded tokens, slippage tends to be larger because prices can be more volatile and liquidity can be thin. Decentralized exchanges usually ask you to set a slippage tolerance before you swap.

Limitations of Measuring Slippage

Slippage figures depend on what counts as the “expected price”. The quote on your screen, the price when the order left your device and the price when it reached the venue can all differ, so two calculations of the same trade may disagree. A single trade’s slippage also says little; patterns only appear across many fills under similar conditions. Practicing order types in a stock market simulator shows how market and limit orders behave, though simulated fills may not reflect real liquidity.

FAQs

The Bottom Line

Slippage matters most to traders who use market or stop orders in volatile, thinly traded or after-hours markets, and to anyone placing large orders. Limit orders block negative slippage at the cost of missed or partial fills, while a slippage tolerance trades fill reliability for price protection. Measure slippage across many fills, since a single trade reveals little.