Slippage is the difference between the expected execution price of a trade and the actual price at which the trade fills. When you place an order at a specific price level, market movements or low liquidity can cause your execution to happen at a different price. If the market moves in your favor before execution, you get positive slippage; if it moves against you, you get negative slippage.
How Slippage Occurs
Slippage happens most often during high volatility or low liquidity. When prices move rapidly (e.g., at major news releases or market open and close times), the price can shift between the moment you click "buy" and when your broker processes the order. During periods of low liquidity, there may not be enough supply or demand at your expected price, so your order fills at a less favorable level instead.
Positive vs. Negative Slippage
Positive slippage means you get a better price than you expected—your buy fills below your limit, or your sell fills above it. This is less common but a pleasant surprise. Negative slippage is the opposite: your buy fills above your limit, or your sell fills below—costing you money.
Market Orders vs. Limit Orders
Market orders are more vulnerable to slippage than limit orders. A market order executes immediately at whatever price is available, while a limit order only fills if the market reaches your specified price or better. Some traders accept small negative slippage on fast trades but use limit orders to avoid surprise fills on longer-term positions.
Slippage vs. Spread
Slippage differs from spread. The spread is the fixed cost difference between buy and sell prices that exists constantly, while slippage is the gap between your expected price and actual execution price. Both reduce your profit margin on trades.
