Understanding Slippage and How Does It Affect Your Trades?

Slippage is the difference between the price at which you expected your trade to be executed and the price at which it was actually executed. It is a natural feature of financial markets that every trader must understand and manage.

Major News Releases

Economic data like Non-Farm Payrolls (NFP) and interest rate decisions can cause prices to move dozens of pips in milliseconds. Market orders placed during these moments almost always experience slippage.

Market Open and Close

When the market opens after a weekend or holiday, prices can “gap.” Any pending orders located within the gap will be filled at the first available market price.

Low Liquidity Conditions

During quiet trading hours, a large order may move the price before it is fully filled, resulting in partial slippage as the order eats through the order book.

Negative vs. Positive Slippage

Negative slippage occurs when you are filled at a worse price than expected (most common). Positive slippage happens when the market moves in your favour between submission and fill, resulting in a better entry price.

How to Reduce Slippage

To reduce slippage: use limit orders instead of market orders whenever possible; avoid market orders immediately before or after major news events; and trade during the most liquid hours (such as the London/New York overlap).

Key Takeaway: Slippage is unavoidable in trading, but it can be minimised. Understanding when and why it occurs helps you choose better order types and timing for your trades.