Slippage is the difference between the price you expect to trade at and the price you actually get when your order is filled. It can work against you, or in your favour, and it shows up immediately in your P&L.
Traders usually talk about slippage in points, pips or cents. If you click to buy at 100.00 and your fill is 100.08, that 8 cents is negative slippage on a buy. If you get 99.96 instead, that is positive slippage, because you paid less than expected.
Why slippage happens
Prices move while your order is travelling, and liquidity at the price you see may be smaller than your order. That is the core of slippage. A few common drivers are:
- Volatility – fast markets change between the moment you press buy or sell and the moment the venue matches your order.
- Liquidity and depth – there may not be enough size at the best price. Your order then “walks the book”, filling the remainder at worse levels.
- Order type – marketable orders accept the next available price, so they are most exposed to slippage. Strict limit orders cap the price you will accept.
- Order size and impact – large orders can move the price as they execute, especially in thin names or outside peak hours.
- Gaps and news – opening gaps and surprise headlines can leave no trades at your intended level.
- Latency and routing – small delays and where an order is sent can matter. Exact behaviour varies by broker and venue.
How it is measured and shown in your P&L
There are two simple ways to think about slippage:
- Versus the last visible price or quote. If you hit buy seeing 100.00 and get 100.06, slippage is +0.06 for a buy order, which hurts.
- Versus your expected or benchmark price. Many traders compare fills to a benchmark such as the mid price at order release, opening price, or a volume-weighted average price for the period.
On a buy, worse than expected is a higher price. On a sell, worse than expected is a lower price. That difference flows straight into your P&L. If you bought 2,000 shares and slipped by 3 pence, that is £60 of extra cost before fees. If you sold and slipped by 3 pence the other way, you gained £60 compared with your expectation.
Market, limit and stop orders: how they affect slippage
Market orders instruct the venue to fill immediately at the best available prices. They prioritise speed and certainty of execution, not price, so they are the most exposed to slippage. In quiet, liquid markets the effect may be tiny. In fast or thin markets, slippage can be meaningful.
Limit orders set the worst price you are willing to accept. For a buy, a 100.00 limit will only fill at 100.00 or better. This can eliminate negative slippage, though you risk a partial fill or no fill at all if the market trades through quickly or the size at your level is small. You can sometimes be price-improved, which is positive slippage.
Stop orders are designed to trigger when a level is reached, often to exit a losing trade or enter on momentum. A basic stop becomes a market order when triggered, so slippage can be large if the price gaps through the stop. Some providers offer stop-limit or guaranteed-stop features, but availability and rules vary.
Spread, liquidity and slippage: related but not the same
The quote shows the best bid and offer. The spread is the gap between them. Slippage is the extra difference between where you expected to trade and where you actually traded, on top of any spread you already pay.
Example: the bid is 99.98, offer 100.00. You send a market buy for 3,000 shares. There are only 1,000 shares available at 100.00, the next 1,000 at 100.02, and the final 1,000 at 100.05. Your average fill is 100.0233. You have paid the 2-cent spread on the first 1,000 and suffered slippage because you consumed higher offers for the balance. If you had used a 100.01 buy limit, you would have filled 1,000 at 100.00, missed the rest, and avoided the extra slippage, but you would still be short of your full size.
Realistic examples across markets
Shares: A small-cap stock posts a profit warning before the open. You place a stop to sell at 250p, but there are no buyers there after the gap. The stop triggers and fills at 236p. That 14p is slippage driven by a gap and thin depth at the open.
FX: You buy EUR/USD at market during a data release. The pair jumps a few pips while your order routes. You see a fill three pips higher than the price on your ticket. That three pips is slippage, common around scheduled announcements.
Crypto: On a decentralised exchange using an automated market maker, large market orders move the price against you as they consume liquidity from the pool. Many interfaces show a “slippage tolerance”. If the expected price impact exceeds that tolerance, the trade will usually fail rather than fill at a worse level. Exact mechanics vary by protocol and platform.
How traders try to control slippage
- Prefer liquid hours and venues. Trading when the order book is thick reduces the chance of walking several levels.
- Use limit or stop-limit orders. You cap the worst price. The trade-off is execution risk.
- Break large orders into clips. Slicing over time can reduce market impact, though it increases execution time and exposure to drift.
- Work orders passively. Posting at the bid or offer can earn you price improvement, but you might not be filled if the market runs away.
- Avoid the most volatile windows. Major data, earnings releases and the seconds after the open often produce the largest slippage.
- Set realistic slippage tolerances. Some platforms let you specify a maximum deviation. Behaviour varies by provider.
- Backtest and benchmark. Compare your fills to a fair benchmark, then adapt your approach. This is part of sound risk management.
Common confusions and edge cases
- Positive slippage exists. It is less talked about, but you can be filled better than expected, for example when a sell order hits hidden demand slightly higher than the visible bid.
- Partial fills are not slippage. They are an execution outcome. Slippage is about the price difference, not whether you got all your size.
- Fees and spread are separate. Commissions and financing are explicit costs. The spread is an implicit cost at a point in time. Slippage is a separate execution effect that can add to, or reduce, those costs.
- Guaranteed features vary. Some brokers offer protection that caps slippage on stops for a fee, or internal price improvements. Rules, eligibility and costs differ by provider and instrument.
A quick way to estimate the impact
You can approximate likely slippage by looking at the order book depth and average trade size. Suppose you want to buy 5,000 shares and you see 1,500 at the offer, then 1,200 two ticks higher, then 3,000 another three ticks higher. If you cross the spread with a market order, your volume-weighted fill will include pieces at each level. Multiply the tick size by how many ticks you expect to traverse, then by your order size. Even a small per-share slippage compounds quickly when you scale up.
Traders who run systematic strategies often track expected versus realised execution costs over time and decide whether they can tighten limits, reduce size, or accept more execution risk to improve their average results.
Slippage is part of live trading, not an error message. The aim is not to eliminate it completely, which is unrealistic, but to understand when it bites hardest and choose order types and timing that keep it in line with your plan and your tolerance for execution risk.