Slippage is the difference between the expected price and the executed price. It occurs when an order is filled at a price different from the requested one. Slippage can happen under various conditions.
It usually occurs when market liquidity is low. This can be observed during Market rollover periods when major global financial institutions close.
Trading during these times with low liquidity orders may lead to slippage. The main reason for slippage is the absence of a counter order at the desired price level when filling your trade order. When liquidity is low, the spread also tends to be higher.
Low liquidity currency pairs (minor & exotic forex pairs) are more likely to experience spread widening and slippage.
Weekend Gap – For swing traders who hold positions over long periods such as days, weeks, or months, the market may open with a gap after the weekend. In such cases, the opening price of a pair can reach the Stop Loss (SL) or Take Profit (TP) levels, but the execution may occur at a different price regardless of the SL/TP levels.
High volatility market conditions – During major macroeconomic news releases such as NFP, CPI, and immediately after, the market moves sharply, causing slippage.
Positive Slippage – occurs when a trade is executed at a more favorable price for the trader (opening or closing a position).
There are two scenarios:
When pressing the Buy button, if the Ask price decreases. In other words, your buy order opens at a price lower than the requested order price, potentially yielding higher profit.
When pressing the Sell button, if the Bid price increases. That means your sell order opens at a price higher than the requested order price, potentially yielding higher profit.
These scenarios describe entering trades but can also occur when exiting trades. In the market, closing a Buy trade with a Sell order at a better-than-expected price results in positive slippage, and the same applies to Sell trades.
Negative Slippage – happens when a trade is not executed at the desired price.
When placing a Buy order at a specific price, if the order is filled at a price higher than expected.
When placing a Sell order at a specific price, if the order is filled at a price lower than expected.
The example above shows different types of slippage, and their main cause is quite simple. It takes a certain amount of time to send the order to the server and to execute the order. This means your order is matched with available price quotes from liquidity providers or market liquidity. Because it takes time for the order to reach the server, this creates conditions where slippage can occur.