Slippage occurs when an order is executed at a price that differs from the originally requested price. In other words, slippage occurs when there is a change in the bid/ask price between the moment a market order is placed and when it gets executed on the exchange. Slippage is the difference between the expected price of an order and the price at which the order is executed.
- When does slippage happen?
Slippage is most prevalent during periods of market volatility, where prices can fluctuate rapidly. Various factors, such as trading server delays and significant market developments, can contribute to slippage. It's important to note that slippage can occur when executing both market and pending orders across all types of trading accounts.
- Is slippage a bad thing?
While it's advisable to minimize slippage for a smoother trading experience, it's worth noting that slippage isn't inherently detrimental since the price difference can work either in favor of or against the trader. The executed price of an order can be classified as positive slippage, negative slippage, or no slippage.
Positive slippage: occurs when the ask price is lower when buying or the bid price is higher when selling.
Negative slippage: on the other hand, happens when the ask price is higher when buying or the bid price is lower when selling.
