Key fact: Slippage is the difference between the price requested for an order and the price at which it executes. It is most common during high-impact news releases and at the Sunday market open, when liquidity is thinnest.
How slippage works
Slippage is the gap between the price you request and the price your order actually fills at. It appears when liquidity is thin or when the market moves in the moment between your click and the venue touching the order book. A market order takes the best available price, which may be worse than the screen showed; a limit order caps the price but risks not filling at all. Slippage can run in your favour too, though it usually does not when it matters.
Worked example
You send a market buy on a pair quoting 1.10000, but in those milliseconds the offer moves and you fill at 1.10004. That 0.4 pip of slippage on a standard lot is about $4, on top of the spread. In fast conditions, around a news release or a thin weekend session, slippage can be several pips, which is why position size and timing matter as much as the entry level itself.
How to reduce slippage
Trade liquid instruments during deep-liquidity windows, such as the London and New York overlap on major forex pairs. Avoid sending market orders into scheduled high-impact news. Use limit orders when the exact level matters more than guaranteed execution. On Volity, dynamic spreads on majors are tightest during peak liquidity, which is also when slippage is smallest.
Why it matters
Slippage is a real cost that backtests usually ignore, so a strategy that looks profitable on clean historical fills can lose money live. Budget for it, especially on tight-stop intraday systems where a few pips decide the edge. Related: drawdown.
Read the full breakdown in our forex trading guide.
