Slippage Definition & Example

forex slippage

It either occurs by moving up or pushing down in the Forex market and is termed as a Forex gap or market gap. They primarily occur over the weekend since the Forex market is open 24/7 every day and closes only on the weekends. Such gaps can occur due to various other reasons, like a major news announcement, a significant financial breakthrough, or an economic/global crisis. Positive slippage occurs when a trader or investor receives a better-than-expected price, whereas negative slippage occurs when the trader or investor receives a worse-than-expected price.

Thus, it’s essential to know how it occurs and how to avoid its negative impact. If you need to get into or out of a position immediately, you can use a market order.

Stop and Limit Orders

The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and as such is to be considered to be a marketing communication. You’ll also miss out on a trade being completed with a limit order if there isn’t enough volume there to make the trade.

What is positive slippage in Forex?

Positive slippage is when you receive a price that is better than the one you were attempting to buy at. For example, you might be buying GBP/USD with a limit order at 1.1965, but the order actually gets executed at 1.1962 thus getting you into the trade at a price that is 3 pips better than your order.

David J. Rubin is a fact checker for The Balance with more than 30 years in editing and publishing. The majority of his experience lies within the legal and financial spaces. At legal publisher Matthew Bender & Co./LexisNexis, he was a manager of R&D, programmer analyst, and senior copy editor.

On easyMarkets Platform

Subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. The nature and extent of consumer protections may differ from those for firms based in the UK. If you prefer to trade the stock market, usually the highest volume is during the opening/closing, as well as when key statistics are about to be published. Some markets are more prone to slippage than others, and there are various scenarios that cause it to happen more frequently. The privilege of a quality broker is, in addition to the even distribution of positive and negative slips, also to admit positive slips to his clients in the event that they occur. Introduction to Technical Analysis in ForexTechnical analysis in Forex trading provides you with significant market trends, reversals and fluctuations and in turn helps you long and short term trades.

forex slippage

If you don’t trade during major news events, large slippage usually won’t be an issue, so using a stop-loss is recommended. If catastrophe hits, and you experience slippage on your stop-loss, you’d likely be looking at a much larger loss without the stop-loss in place. If you’re already in a position when the news is released, you could face substantial slippage on your stop-loss, exposing you to much more risk than expected. Check the economic calendar and earnings calendar to avoid trading several minutes before or after announcements that are marked as having high impact. A limit order and stop-limit order (not to be confused with a stop-loss) are often used to enter a position. With those order types, if you can’t get the price you want, then you simply don’t make the trade. Sometimes, using a limit order will mean missing a lucrative opportunity, but it also means you avoid slippage.

Negative Slippage

Now you have what you need to know to handle slippage in your trades! Remember, avoiding slippage entirely may not be worth it – you might find yourself boxed out of lucrative trades by waiting for the perfect price. However, using limit orders instead of market orders can be a good idea if you want to minimize slippage in trades where you feel confident your security will reach your ask price. If you’re using a stop-loss, which will get you out of a position that’s tanking, you’ll have to use a market order. A stop-loss is more about damage control than waiting for the perfect moment to sell. If your position is quickly moving against you, it’s more important to get out of there than to match a specific price through a limit order. If you want to take more control of your trading, read on for everything you need to know about slippage.

Therefore, Key Way Investments Ltd shall not accept any responsibility for any losses of traders due to the use and the content of the information presented herein. Past performance and forecasts are not reliable indicators of future results. forex slippage Economic calendar and earnings calendar to avoid trading several minutes before or after announcements that are marked as high impact. – they pay a lower price than expected because the price dropped just before their order was executed.