What is Price Slippage? A Quick Guide for Traders

Topic Summary: 

• Slippage is the difference between the price you expect and the price you actually get 
• It can be positive or negative, depending on whether the market moves in or against your favor before your order fills.
• Volatility, liquidity, order size, and execution speed all affect how much slippage you experience.
• Using limit orders, trading during high-liquidity hours, and setting slippage tolerance can help reduce unexpected fills.

Every trader knows about spreads and commissions. But there’s another cost that often slips under the radar: price slippage.

It’s what happens when the price you expect and the price you actually get aren’t the same.

Sometimes it works in your favor, sometimes it doesn’t. Either way, slippage plays a bigger role in your trading results than most people realize.

It’s shaped by volatility, liquidity, order size, and even how quickly your broker’s systems connect you to the market.

Understanding what slippage is, why it happens, and how it connects to spreads and execution quality helps traders maintain greater control and avoid unexpected outcomes.

With this knowledge, it is easier to manage trades and improve trading results.

What is Price Slippage? 

Slippage is the small gap between the price you planned to trade at and the price your order actually fills.

It’s not a glitch but a regular part of how markets move.

Let’s say you place a buy order for EUR/USD at 1.1050, but it executes at 1.1052. That’s 2 pips of negative slippage. If it fills at 1.1048 instead, that’s 2 pips of positive slippage, a better deal than expected.

In simple terms: Slippage = Executed Price − Expected Price

There are two kinds of price slippage: positive and negative.

A positive result means the trade worked in your favor.

A negative result means the market moved against you before your order went through.

Slippage might seem minor, but across hundreds of trades, those differences can add up.

Knowing how it works helps you read market conditions better and judge how efficiently your platform executes orders.

Why Can Slippage Happen When You Trade?

1. Market volatility

Fast-moving markets are the leading cause of slippage.

During major news releases, central bank announcements, or unexpected events, prices can jump within seconds.

By the time your order reaches the market, it may be filled at the next available price, either slightly higher or lower than what you intended.

2. Liquidity levels

Slippage increases when there aren’t enough buyers or sellers to fill your order at your chosen price.

This usually happens during market openings, closings, or quiet trading sessions, such as late-night hours or holidays.

The thinner the market, the more likely your order will skip to the next available price level.

3. Order size

Large orders can move the market, especially in low-liquidity conditions.

If your trade size is bigger than what’s available at your target price, part of your order will fill at the next best prices.

Breaking large positions into smaller chunks can help reduce that impact.

4. Market structure

Every market has a structure comprising liquidity providers, brokers, and trading systems.

Market makers quote fixed prices and can absorb smaller orders internally, while ECN (Electronic Communication Network) models pass your order directly to the market.

The structure determines how quickly and accurately your order is filled, and therefore how much slippage you might see.

5. Timing and execution delays

Even milliseconds have an impact.

During high-traffic periods (like when multiple major markets overlap), order flow spikes, and that can delay execution.

The longer the delay, the greater the chance that prices move before your order hits the book.

How Different Order Types and Markets Experience Slippage

Slippage doesn’t affect every trade in the same way.

The type of order you place, the market you trade, and even the time of day can all change how much price movement you see between order and execution.

Market Orders vs Limit Orders: Which is More Likely to Slip?

A market order tells your broker to execute immediately at the best available price.

It guarantees the fill, not the price, so it’s more likely to experience slippage in fast markets.

A limit order does the opposite.

It sets a maximum (for buys) or minimum (for sells) price you’re willing to accept.

That limits slippage, but your trade may not be filled if the market never reaches your price.

Example:

If EUR/USD trades at 1.1050:

• A market buy order might fill at 1.1052, a small negative slippage.
• A limit buy order at 1.1050 won’t fill unless the market trades back down to that level.

Traders often balance the two using market orders for speed and limit orders for precision.

Forex Trading: Why Major News Events Cause Slippage

Forex markets are deep and liquid, but slippage can spike during key events like Non-Farm Payrolls, central bank decisions, or unexpected data releases.

Session overlaps, such as when London and New York trade simultaneously, offer the highest liquidity and, generally, the lowest slippage.

Overnight or pre-market hours, on the other hand, tend to see wider spreads and thinner order books.

Crypto Trading: Volatility Makes Every Tick Count

Crypto markets trade 24/7 and are known for sharp price swings.

That volatility means slippage can occur even on small orders, especially on exchanges with limited liquidity.

Different exchanges also use different matching engines and order routing systems, so two identical trades may fill at slightly different prices depending on where you trade.

Equity CFDs: Open, Close and Earnings Volatility

Equity CFDs tend to see slippage around market open and close when liquidity gaps form between pre-market and live trading.

Earnings announcements can also trigger fast price jumps, particularly in low-float stocks.

Placing limit orders or avoiding entry during the first few minutes of the session can help reduce unexpected fills.

Commodity CFDs: Events and Reports That Move Prices

Commodities like oil, gold, and agricultural products react strongly to scheduled reports and global events.

For example, weekly inventory data or geopolitical headlines can shift prices quickly, creating slippage.

Because these markets can have thinner liquidity outside regular trading hours, order timing plays a significant role in execution quality.

Examples of World Slippage Events

• Brexit referendum (2016): Sharp overnight volatility led to wide spreads and multi-pip slippage across major FX pairs.
• COVID-19 market crash (2020): Extreme uncertainty caused record price gaps in equities and commodities.
• US Non-Farm Payroll (NFP) releases: Frequent source of fast moves in USD-linked pairs, often creating both positive and negative slippage.

Each event highlights the same principle: when prices move faster than systems can execute, slippage becomes part of the trade.

How Slippage, Spreads, and Execution Quality Connect

Slippage is closely tied to spreads and the overall execution quality of your broker.

Together, these three elements determine how much you actually pay to trade.

What’s the Difference Between Spread and Slippage?

Think of the spread as the fixed part of your trading cost: the difference between the bid (sell) and ask (buy) prices.

You’ll always pay this when you open or close a trade.

Slippage, on the other hand, is variable.

It’s the gap between your expected execution price and the actual price you receive.

• Spread = guaranteed cost
• Slippage = potential cost (or gain)

For example:

If the EUR/USD spread is 1 pip and you experience 2 pips of negative slippage, your total cost for that trade effectively becomes 3 pips.

If you get 1 pip of positive slippage, your cost drops to 0.

How Execution Quality Affects Slippage

Execution quality reflects how efficiently your broker processes trades, from order routing to final fill.

High-quality execution aims to:

• Reduce delays between clicking and filling.
• Match you with deep liquidity sources for better prices.
• Minimize rejected or partially filled orders.

Metrics often used to measure execution quality include:

• Effective spread: The total cost of a trade, including both spread and slippage.
  Fill rate: The percentage of orders successfully executed at the requested price or better.
• Price improvement rate: How often you receive a better price than quoted.

Platforms with robust infrastructure and strong liquidity relationships generally achieve better results across all three.

How Algorithmic and High-Frequency Trading Can Influence Slippage

Large institutions and algorithmic traders constantly scan markets for micro-price differences.

Their speed can move prices before retail orders reach the market, especially during volatile conditions.

This competition for liquidity can lead to more frequent micro-slippage events, where small but consistent shifts accumulate over time.

For retail traders, this highlights why execution speed matters.

Even a fraction of a second can change the final fill price.

Why Broker Execution Models Make a Difference

Not all brokers handle orders the same way.

The two main models are Market Maker and ECN (Electronic Communication Network).

They manage risk and liquidity differently.

• Market Maker: The broker quotes prices and may fill orders internally. This often results in fast execution and limited slippage for smaller orders, though prices are broker-quoted rather than market-derived.
  
• ECN Broker: Orders are passed directly to liquidity providers in a global network. Traders may see tighter spreads but also more exposure to raw market conditions, including higher volatility and slippage during major events.

Understanding how your broker executes trades can help you set realistic expectations around fill quality and potential slippage.

How to Manage Slippage and Reduce Its Impact When Trading

You can’t completely avoid slippage, but you can manage it.

The goal isn’t to eliminate it entirely, but to understand when it’s most likely to happen and take simple steps to limit its effect on your trades.

Below are key strategies traders can use to reduce slippage risk and improve execution outcomes.

Choose the Right Order Type for Your Goal

Different order types handle slippage differently. Knowing when to use each one makes a big difference.

• Market Orders: Prioritize speed. You’ll get filled immediately at the best available price, but that price may shift slightly in volatile conditions.
  
• Limit Orders: Prioritize control. Your order will only execute at your chosen price or better, protecting you from negative slippage.
  
  It’s worth noting there is a chance it won’t fill at all.
  
• Stop-Loss Orders: Essential for risk control but can be vulnerable to slippage during sharp gaps, such as weekend opens or major news events.
  
• Guaranteed Stop-Loss Orders (GSLOs): Some platforms offer GSLOs, which ensure your stop is executed at the specified price, even in volatile markets.
  
  They usually come with a slight premium but remove the uncertainty of slippage during fast moves.

Trade When Liquidity is Highest

Liquidity means how easily your order can find a matching buyer or seller.

Trading during high-liquidity times reduces the likelihood of slippage.

• For Forex, this often means the overlap between the London and New York sessions.
• For equities, the most stable liquidity usually appears in the middle of the trading day, avoiding the volatility of opens and closes.
• For commodities and crypto, liquidity can vary by exchange and time zone, so avoid thin overnight periods where spreads widen.

Avoid trading during major data releases unless you’re specifically targeting volatility.

Time Your Trades Around Major Market Events

Scheduled announcements, such as central bank decisions, employment data, or earnings releases, can cause price jumps within seconds.

If you don’t intend to trade the volatility, it’s safer to wait until markets settle and spreads tighten again.

Break Large Orders Into Smaller Parts

Executing one large trade in a thin market can cause the very slippage you’re trying to avoid.

Many professional traders manage this by scaling in, meaning placing smaller orders over time to limit market impact and secure more consistent fill prices.

Use Slippage Tolerance Settings on Your Platform

Most modern trading platforms, including PU Prime, allow you to set a slippage tolerance, which is the acceptable range of price movement before your order is rejected.

For example, setting a 2-pip tolerance means your trade will only execute if the market stays within that range.

Anything beyond it is automatically cancelled, protecting you from unwanted fills.

Technology also plays a significant role in the amount of slippage you experience.

The faster and more reliable your trading platform is, the smaller the gap between your expected and actual prices tends to be.

How PU Prime Helps Reduce Slippage

PU Prime connects traders to a vast network of global liquidity providers.

This helps orders fill faster and closer to the price you expect.

The platform’s trading technology is built for speed and stability, aiming to keep execution smooth even when markets move quickly.

While no platform can remove slippage completely, PU Prime’s focus on deep liquidity and efficient order routing helps keep it to a minimum.

Try PU Prime and Master Slippage for Better Trading Outcomes

Slippage is a regular part of trading, and the more you understand it, the more control you’ll have over your trades and costs.

Using the right order types, trading when liquidity is high, and setting sensible slippage limits can help you trade more consistently.

Over time, those habits, along with a reliable trading platform, can make a real difference.

PU Prime gives traders the tools and technology to manage slippage with confidence, so you can focus on making smarter trading decisions.

Ready to get started? Open a live trading account with PU Prime to access real-time pricing, powerful platforms, and a smooth path from demo to live when you are ready.

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FAQs

Is slippage always negative?

No. Slippage can work in your favor, too. If your order is filled at a better price than expected, that’s called positive slippage.

It’s less common, but it does happen, especially in fast markets where prices move quickly in your direction.

Can slippage be avoided entirely?

Not entirely. Even with fast execution and deep liquidity, slippage is a regular part of how markets work.

You can reduce it by trading during high-liquidity sessions, using limit orders, or setting slippage tolerance levels, but no system can remove it completely. 

What’s considered acceptable slippage for different assets?

It depends on the market and its liquidity. For major Forex pairs, 1–2 pips is generally normal.

In crypto, slippage can be wider (anywhere from 5 to 10 pips or more) depending on volatility and exchange depth.

For stock or commodity CFDs, it often varies by trading session and news activity.

Is slippage tax-deductible as a trading expense?

In some countries, trading costs such as spreads, commissions, and slippage may be deductible expenses for active traders.

However, this information is general only.

Always speak with a qualified tax professional for guidance on your specific situation.