Slippage

Where the difference comes from

An order fills at the best price available when it reaches the market, not at the price on your screen when you clicked. Between those two moments the book can move, and a market order takes whatever is there.

Slippage can be positive as well as negative, but negative slippage dominates for most traders because the moments they most want to trade — breakouts, news, stop triggers — are exactly the moments liquidity thins out.

When it is worst

• Scheduled news releases, where the book empties for seconds around the print.
• Session opens and closes, before liquidity settles.
• Illiquid instruments and thin overnight hours.
• Gaps over weekends and holidays, where your stop fills at the next available price rather than the level.
• Large orders relative to the book, which walk through several price levels to fill.

What it costs you

Slippage is subtracted from expectancy on every trade. If you risk $100 per trade and average $8 of slippage, your real risk is $108 and your edge is 8% smaller than your backtest suggested.

Over a hundred trades that is an entire position's worth of capital, paid invisibly. A strategy with a thin edge and frequent trading can be profitable on paper and unprofitable in the account for no other reason.

How to reduce it

Stops are the one place limit orders do not help. A limit stop can fail to fill in exactly the conditions where you most need to be out, which trades a small, known cost for an unbounded one.

• Use limit orders for entries where the setup allows waiting for your price.
• Trade liquid instruments during their active hours.
• Avoid entering immediately before scheduled high-impact releases.
• Size positions relative to the instrument's typical depth, not just your account.
• Measure your actual slippage from fill data and build it into expectancy rather than assuming zero.

Common mistakes

• Backtesting with zero slippage and then wondering why live results are worse.
• Using market orders for entries that had no urgency.
• Holding through scheduled news without accounting for the gap risk to your stop.
• Assuming quoted spread is the whole execution cost.
• Never measuring actual fills, so the size of the problem stays invisible.

Put it into practice

Frequently asked questions

How much slippage is normal?

It depends entirely on the instrument and the moment. Liquid futures and major FX pairs in active hours can be close to zero; thin markets, news events and stop triggers can be many times the spread. Measure your own fills rather than using a rule of thumb.

Can I avoid slippage completely?

Not on stop orders, and not reliably on entries you need filled immediately. Limit orders remove it on entries at the cost of sometimes missing the trade.

Does slippage affect backtests?

Substantially. A backtest assuming perfect fills overstates results, and the effect grows with trade frequency. Add a realistic slippage and commission assumption before trusting any result.

Is slippage the same as spread?

No. Spread is the quoted gap between bid and ask. Slippage is the additional difference between the expected price and the actual fill. Both are execution costs and both belong in your calculations.

Related terms