Slippage is the difference between the price you expected to enter/exit a position and the actual execution price. It mainly happens in two cases:
- Low liquidity: not enough opposing orders → broker fills at the best available price, further than requested
- Fast market moves: economic announcements, flash crashes, opening gaps → price moves between click and fill
Slippage is asymmetrically unfavorable: you enter or exit worse than expected more often than better. On a market-maker broker, this negative slippage can be systematic — a sign of poor execution quality.
When slippage becomes critical:
- On stop-losses during gaps: if the market opens 50 pips below your -30 pip stop, you lose 50 pips instead of 30
- During high-impact news (NFP, Fed decision, CPI): spread can widen to 20+ pips and slippage reach 30-100 pips
- During flash crashes (CHF Jan 2015, GBP Oct 2016): historic slippages of hundreds of pips, wiping accounts
How to limit slippage: trade during liquid hours (London + New York overlap), avoid news, use limit orders instead of market orders for non-urgent exits, choose a low-latency ECN broker, and on some brokers, activate a guaranteed stop for a premium.