What is slippage?
Slippage refers to the difference between the expected price of a trade and the price at which the trade is actually executed. This can occur during periods of high volatility or when there is a delay between the initiation of a trade and its execution.
Slippage can result in a trader getting a different price than expected, leading to potential losses or reduced profits. It is a common occurrence in fast-moving markets and can impact the overall performance of a trading strategy.
Example of slippage in forex
Let’s say a trader wants to buy 100,000 units of EUR/USD at 1.1250. However, due to market volatility or a delay in order execution, the trade is filled at 1.1260.
This 10-pip difference results in negative slippage for the trader. As a result, the trader pays more for the currency than initially planned, impacting the potential profit or loss on the trade.