Slippage

Slippage is the difference between the price at which a trader requested an order to be executed and the actual price at which it was filled; it can work in favor of the trader or against them.

How it occurs: Slippage occurs due to rapid price changes between the moment an order is submitted and the moment it is executed, especially during periods of high volatility, major economic news releases, or low liquidity.

Importance for the trader:

• Understanding it helps anticipate potential execution differences, especially when using market orders.
• It affects the accuracy of stop-loss and take-profit calculations.
• It serves as an indicator of liquidity levels and execution speed on the trading platform.

Common mistakes:

• Believing that slippage is always negative, whereas it can sometimes be positive (in the trader's favor).
• Ignoring the impact of economic news on the likelihood of increased slippage.
• Failing to account for slippage when placing stop orders close to critical levels.

Caution is advised when trading during major news events due to the heightened probability of significant slippage occurring at those times. How it appears on the EVEST platform: Slippage occurs on EVEST when the price shifts between the moment an order is sent and when it is filled by the liquidity provider. The platform displays a detailed trade report showing both the requested price and the actual execution price to ensure complete transparency with the trader.

When it is most prevalent: The likelihood of slippage increases during major economic data releases, at market opens following the weekend, and when trading financial instruments with relatively low liquidity.

Risks: Slippage can be either positive or negative, but in severe cases, it can result in a trade or stop-loss being executed at a price far worse than expected, thereby increasing actual losses beyond what was planned.

Additional common mistakes: Some traders overlook the risk of slippage when using market orders during news releases, or incorrectly assume that all platforms guarantee zero slippage under any market condition.

Relationship to risk management: Traders should build in an extra buffer for potential slippage when setting stop-loss levels, especially around economic announcements. EVEST also advises its users to avoid entering new positions using direct market orders right before or during high-impact events, relying instead on pending orders that offer tighter price control to minimize the adverse impact of this phenomenon on their capital.