What is Slippage?

Slippage occurs when an order executes at a different price than expected, typically due to market movement or insufficient liquidity. It can be either positive (better price) or negative (worse price), though negative slippage is more common.

Types of Slippage

Positive Slippage

• Order fills at better price than expected
• Common in high-volatility uptrends
• Benefits the trader

Negative Slippage

• Order fills at worse price than expected
• Common in low liquidity conditions
• Increases trading costs

Causes

Market Conditions

• Low liquidity periods
• High volatility events
• Large order sizes
• Market gaps

Mitigation Strategies

Risk Management

• Use limit orders instead of market orders
• Break large orders into smaller pieces
• Monitor market depth before trading
• Consider slippage in position sizing

Related Terms

• Market Depth
• Liquidity
• Order Types
• Trading Volume