Question 1

What is slippage in trading?

Accepted Answer

Slippage is the difference between the price you expected when you sent an order and the price your order actually filled at. It happens because the market moves between the click and the execution, and because a large order can take several price levels to fill.

Question 2

When does slippage get worse?

Accepted Answer

Slippage grows in fast markets, where the price is moving quickly, and in thin markets, where there is little resting size at each price. Big news, the open, and large orders relative to available liquidity all make it larger.

Question 3

Can a limit order eliminate slippage?

Accepted Answer

A limit order caps the price you will accept, so it removes the risk of a worse fill than your limit. The tradeoff is that it can sit unfilled if the market never reaches your price, so you trade slippage risk for fill risk.