Slippage is the difference between a reference price and an order's executed price. Traders can measure it against the quote when they submit an order, the midpoint, or another stated benchmark. The chosen benchmark changes the reported amount.
Sources of Slippage
A market order can consume multiple price levels when displayed size at the best bid or ask cannot fill the full quantity. Prices can also move between the quote and execution. Fast markets, thin books, exchange latency, and large orders can widen the gap.
A limit order caps the price a trader will accept, though it may remain unfilled or receive a partial fill. A market order seeks execution without setting a price limit, so its final price can differ from the quote.
Example
A trader sends a market buy after seeing an ask of $100. The order fills 4 units at an average of $100.20. Against the submission quote, the trader's slippage is $0.20 per unit, or 0.20%. Fees are separate. The example shows a measurement method, not a typical cost.
Related Costs
Spread, market impact, and slippage describe connected parts of execution. Spread measures the gap between best bid and ask. Price impact estimates the price effect from consuming liquidity. Slippage records the difference between a selected benchmark and the fill.
See Spread, Depth of Market, Price Impact, and Limit Order.