What is Slippage

Title: What is Slippage

Slippage is a common occurrence in Forex and other financial markets that happens when a trade is executed at a different price than expected. It usually occurs during high volatility, low liquidity, or major news events, and it can affect both entry and exit points of a trade. Understanding slippage is essential for proper risk management.

For example, you might place a buy order at 1.2000, but due to sudden market movement, your order is executed at 1.2005. That 5-pip difference is slippage. While small slippage is common and often unavoidable, large slippage can significantly impact profits or increase losses, especially when using high leverage.

Slippage can be positive or negative. Positive slippage occurs when the execution price is better than expected, giving a slightly better entry or exit. Negative slippage, on the other hand, means your trade is executed at a worse price, which can hurt results over time if frequent.

High-impact news events, thinly traded currency pairs, or fast-moving markets are the main causes of slippage. Using limit orders instead of market orders can reduce its impact, while proper planning and risk management help traders cope with unavoidable slippage.

In short, slippage is a normal part of trading, but understanding it and planning for it separates disciplined traders from those who are constantly surprised by market movements.