Slippage (forex slippage).

When working on a currency or stock exchange, unpleasant moments often occur that significantly complicate a trader’s work and sometimes cause losses.
One of these moments is price slippage.

Slippage (Forex slippage) – execution of an order at a price different from that presented in the current quote. It can have both positive and negative values ​​depending on the direction of the trend and the type of position being opened.

The easiest way to understand the essence of this event is to use the example of opening a specific order.

You open a buy order at a price of 1.2500; at this time there is an upward trend in the market. But instead of the stated value, a Slippage occurs and a new position is opened at a price of 1.2505, that is, five points further than you expected, thereby reducing your possible profit.

Slippage in Forex can also be positive; in this case, in our example, the quote would have opened at a price of 1.2495, that is, we would have made a purchase 5 points cheaper. But such options happen extremely rarely; more often the broker sends a refusal to open a position ( requote ).

Reasons for slippage in Forex.

The main reasons why orders are executed at different prices than were presented in the quote are:

• High market volatility - price changes occur at such a speed that a new order simply does not physically have time to open at the order price.

• Slow execution of orders – the reverse side of the previous option, when slippage occurs due to the slow operation of the broker or communication failures when transmitting an order to open a position.

• Through the fault of the broker – dishonest brokerage companies ( forex kitchens ) often deliberately delay the execution of orders, opening them at a more unfavorable price for the trader.

I would like to note that the occurrence of Slippage is actually a violation on the part of the broker, since if market prices do not match, the broker is obliged to re-request the trader’s consent to open a new position at the changed price.

Price slippage occurs more often when using the market option for order execution; in the best case, brokers allow you to set the maximum size of the deviation from the market price, and in the worst case, the size of slippage can be several tens of points.

In order for this event to happen as rarely as possible, it is advisable to choose accounts with exact execution of orders ( Instant Execution ). If the price on the market no longer matches the price in the order, you will simply receive a refusal and an offer to enter the market at a new price.