Glossary
Slippage
The difference between the price you expected when you placed an order and the price you actually got, caused by spreads, thin liquidity and fast markets.
On this page
Slippage is the gap between the price you expected and the price at which your order actually filled. It is a hidden trading cost: it never appears on a commission schedule, yet on active strategies it can exceed every other expense combined. Slippage can go in your favor too, but in fast or thin markets it usually works against the trader who demands immediate execution.
How it happens
A market order takes whatever liquidity is resting on the other side of the order book. If the best offer only has a few hundred shares, a larger buy order works up through higher prices until it is filled. Prices also move between the moment you look at a quote and the moment the order arrives, which matters most at the open, around news and in stop orders that trigger during a drop.
Keeping it in check
Limit orders cap slippage, at the risk of not filling. Trading liquid symbols, avoiding the first minutes of the session and splitting large orders all reduce it. When testing a strategy, build a realistic slippage assumption into the backtest: a system that earns a few cents per trade on paper can turn negative once real fills are counted.