Slippage is a phenomenon that traders need to understand, and how to avoid it effectively.

Financial markets such as Forex and cryptocurrencies experience rapid price fluctuations. Prices can rise or fall significantly at any moment. Traders face the challenge of entering and exiting positions precisely. This is where the issue called slippage arises—a common phenomenon that can significantly impact trading timing.

Therefore, understanding what slippage is, when it occurs, and how to manage it is essential for anyone aiming for success in trading.

What is Slippage? Meaning and Causes Traders Should Know

In trading terminology, slippage is the difference between the price you plan to buy or sell at and the actual price you receive in the market. It represents a deviation from your expected price to a different one. This occurs due to market movements happening between the time you place your order and when it is executed.

For example, you want to buy a currency at 1.3650, but before your order is filled, the price moves to 1.3660. The 10 pips difference is what is called slippage.

Common Types of Slippage Traders Encounter

Slippage is not only one form; it can be categorized into three types based on the direction of price deviation:

No Slippage – When the execution price matches your requested price exactly. An order at 1.3650 is filled at 1.3650.

Favorable Slippage – When the price moves in a beneficial direction. For instance, you want to buy at 1.3650 but get a better price at 1.3640. This type of slippage benefits the trader.

Unfavorable Slippage – When the price moves against you. You want to buy at 1.3650 but receive a worse price at 1.3660, resulting in a loss of potential profit.

Additionally, there is the concept of requote, which is related but not the same. Requote occurs when the original price is no longer available, and you must wait for a new price before trading. Setting appropriate slippage parameters can help you avoid requotes in many cases.

Is Slippage Normal or a Threat in Forex Trading?

Many traders wonder if slippage results from broker evaluation or manipulation. In reality, in fast-moving markets—whether trading via ECN systems or standard accounts—slippage occurs universally.

If your account has access to interbank levels (international banking liquidity), avoiding slippage entirely is impossible. But this is not a crisis; it’s a normal part of trading. Slippage should be viewed as a challenge that requires proper management, not a feature to be completely avoided.

How to Maximize Slippage Prevention Strategies

In truth, completely avoiding slippage is impossible. However, minimizing it is achievable through various methods:

1. Choose Regulated and Reputable Brokers

While slippage is normal, beware of abnormal slippage caused by poor broker choices. If you notice slippage occurring more than 10 times out of 100 trades, or if the slippage value is consistently higher than other brokers, consider switching to a new broker.

Before opening an account, look for reliable brokers regulated by international authorities such as ASIC, FCA, CIMA, or FSC. These brokers adhere to high safety and quality standards.

2. Check and Improve Your Internet Connection Quality

Slow or unstable internet connections can cause delays in order execution, increasing the likelihood of slippage. Use a wired connection instead of Wi-Fi for greater stability.

During trading hours, close other applications or programs that use the internet, such as Skype or download managers, as they can slow down your connection. This is especially important for scalping traders.

3. Set Slippage Parameters in Your Trading Terminal

Open new orders with a maximum slippage setting—this defines the highest acceptable deviation from your requested price. If the price moves beyond this limit, the order will not be executed. This helps prevent entering positions at undesired prices.

4. Use Pending Limit Orders

Pending orders include Stop and Limit orders. Limit orders tend to be filled at better prices and, if your account has interbank access, can effectively prevent slippage and ensure liquidity.

5. Switch to Higher Timeframes

Slippage is often a bigger issue for minute traders. Switching to daily or weekly charts reduces the impact because more time allows prices to stabilize.

6. Avoid Trading During Major News Events

News related to politics and economics significantly increases the chance of slippage. It’s recommended not to trade 30-40 minutes before major news releases and to wait at least 30 minutes after the news to trade again, once the market stabilizes.

7. Study News and Volatility

If you want to trade during high market activity, analyze which news causes about 15 points of slippage on average. If your average profit is 45 pips, such slippage reduces your gains by 30%.

Choose only news events that cause movement of 25-50 points. This way, even if slippage occurs, your personal losses decrease from 30% to 17%. The key is selecting highly volatile news.

Most traders focus on specific news types, such as those that typically cause 30-point movements. Observe the days with the highest volatility for these news and limit trading to those days. This approach helps achieve both profit maximization and loss reduction simultaneously.

Which Currency Pairs Experience the Least Slippage?

Under normal market conditions, highly liquid currency pairs like EUR/USD and USD/JPY tend to experience less slippage because of their massive trading volume, which stabilizes prices.

However, during major economic announcements, even these high-liquidity pairs can encounter significant slippage due to market volatility.

Summary: Slippage Is Part of Trading

In conclusion, slippage is a phenomenon that all traders face in financial markets. It is part of the risk that investors must accept. Completely avoiding slippage is impossible.

Nevertheless, by understanding how it works, choosing the right broker, refining trading techniques, and managing volatility, traders can reduce its impact and improve their chances of success.