Trading Basics

Slippage

When the price you see isn't the price you get.

What it is

Slippage is the difference between the price you expected for a trade and the price at which it actually executes. You click buy at 1.0850, but your order fills at 1.0852. That 2-pip difference is slippage.

Why it happens

Markets move. Between the moment you click and the moment your order reaches the server and gets matched, the price can change, especially during:

  • News events (NFP, interest rate decisions, CPI)
  • Market open/close
  • Low liquidity periods (Asian session for USD pairs)
  • Large position sizes that eat through the order book

Price is discrete, not continuous

Here's something most traders never think about: price doesn't drift smoothly from one level to the next. It jumps. Tick by tick, from one actual transaction to the next, with no rule that says consecutive ticks have to be one step apart.

The word "binary" is useful here, and it has nothing to do with computers. Binary in this context means there's no in-between. Price is either at this level or the next one. There is no dial you can wind gradually from 1.0850 to 1.0852. In 1920, when traders were shouting bids in an open pit with zero technology involved, the same thing was true. The price on the board was the last actual trade. If nobody was willing to sell at 1.0851, that price never existed. The market went straight from 1.0850 to 1.0852.

This is why slippage is structural, not a glitch. Your order sits at a price. The market moves. If the next tick skips over your level because that's where actual liquidity happened to be, your order gets filled at the next available price. The gap between where you expected to fill and where the market actually was: that's the slip.

It's not a broker problem and it's not a technology problem. Brokers can make slippage worse, and latency can amplify it, but neither is the cause. The cause is that two consecutive ticks skipped your price. That's the whole story. Any system that claims to eliminate slippage is either restricting when you can trade or absorbing the cost somewhere else in the spread.

Positive slippage exists

Slippage isn't always bad. Sometimes your order fills at a better price than expected. Honest brokers pass positive slippage to clients. Some don't, they keep the improvement and only pass negative slippage. This is worth checking in your broker's execution policy.

Want slippage to work in your favour by default? Use limit orders. A limit order only fills at your price or better, meaning the "skip" in price works for you, not against you. There are only two order types. Understanding which one you're using changes how you think about every trade entry.
In prop firms: Slippage matters because it affects your real P&L against tight drawdown limits. A 2-pip slippage on a stop loss on a 5-lot position is a $100 unexpected loss. Over many trades, it adds up and can be the difference between passing and failing a challenge.
Related
Spread
The invisible cost on every trade