What is slippage?

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What does slippage means?


I can't find it in the help section. It only says how to adjust it, but it never explain what slippage means.

 

DEFINITION OF 'SLIPPAGE'

The difference between the expected price of a trade, and the price the trade actually executes at. Slippage often occurs during periods of higher volatility, when market orders are used, and also when large orders are executed when there may not be enough interest at the desired price level to maintain the expected price of trade.

Slippage is a term often used in both forex and stock trading, and although the definition is the same for both, slippage occurs in different situations for each of these types of trading.

WHAT IS 'SLIPPAGE'?

In forex, slippage occurs when a limit order or stop loss occurs at a worse rate than originally set in the order. Slippage often occurs when volatility, perhaps due to news events, makes an order at a specific price impossible to execute. In this situation, most forex dealers will execute the trade at the next best price.

Slippage in the trading of stocks, often occurs when there is a change in spread. In this situation, a market order placed by the trader may get executed at a worse than expected price. In the case of a long trade, the ask may have increased. In the case of a short trade, the bid may have lowered. Traders can help to protect themselves from slippage by avoiding market orders when not necessary.

 
cryptocurrency:

What does slippage means?


I can't find it in the help section. It only says how to adjust it, but it never explain what slippage means.

It's like hitting a moving target. You expect the target to be at point A when in fact it's at point B, since it's moving. The difference is slippage.

You seem familiar with cryptocurrency. Suppose you contacted your broker to buy bitcoins at $260 per coin. Rather, your broker sold it to you at $261. This I think is tolerable. But if the market goes really wild at the moment (high volatility), and your broker told you that you have to buy it at $500 per coin, that would be outrageous and most likely you will not proceed. I'm just exaggerating, but sometimes the deviation between the two prices can be huge.

The slippage setting allows you to set a maximum allowable deviation between your target price and the price that your broker (or seller) is willing to offer. If it goes beyond that threshold, the order is not executed.

 
Matija14:

DEFINITION OF 'SLIPPAGE'

The difference between the expected price of a trade, and the price the trade actually executes at. Slippage often occurs during periods of higher volatility, when market orders are used, and also when large orders are executed when there may not be enough interest at the desired price level to maintain the expected price of trade.

Slippage is a term often used in both forex and stock trading, and although the definition is the same for both, slippage occurs in different situations for each of these types of trading.

WHAT IS 'SLIPPAGE'?

In forex, slippage occurs when a limit order or stop loss occurs at a worse rate than originally set in the order. Slippage often occurs when volatility, perhaps due to news events, makes an order at a specific price impossible to execute. In this situation, most forex dealers will execute the trade at the next best price.

Slippage in the trading of stocks, often occurs when there is a change in spread. In this situation, a market order placed by the trader may get executed at a worse than expected price. In the case of a long trade, the ask may have increased. In the case of a short trade, the bid may have lowered. Traders can help to protect themselves from slippage by avoiding market orders when not necessary.

Good
 
Matija14:

DEFINITION OF 'SLIPPAGE'

The difference between the expected price of a trade, and the price the trade actually executes at. Slippage often occurs during periods of higher volatility, when market orders are used, and also when large orders are executed when there may not be enough interest at the desired price level to maintain the expected price of trade.

Slippage is a term often used in both forex and stock trading, and although the definition is the same for both, slippage occurs in different situations for each of these types of trading.

WHAT IS 'SLIPPAGE'?

In forex, slippage occurs when a limit order or stop loss occurs at a worse rate than originally set in the order. Slippage often occurs when volatility, perhaps due to news events, makes an order at a specific price impossible to execute. In this situation, most forex dealers will execute the trade at the next best price.

Slippage in the trading of stocks, often occurs when there is a change in spread. In this situation, a market order placed by the trader may get executed at a worse than expected price. In the case of a long trade, the ask may have increased. In the case of a short trade, the bid may have lowered. Traders can help to protect themselves from slippage by avoiding market orders when not necessary.

There is no wrong slippage for limit orders.
 

Slippage


is a quotes difference between the requested price when the order request happens and the actual price when the request is filled (filled order price).

This difference goes alongside with latency.

Latency is due to:

- your server/data center to broker's server communication

- liquidity providers data centers to broker's server 2 steps communication flow

plus, slippage occurs when apparently there is no liquidity available on the price level you are requesting to trade (it is called price interruption) and it can be (often) caused by liquidity network inefficiencies or (less often) by a price manipulating practise lead by dealers risk managers.

So slippage is essentially 3 things (hardly ever occuring altogether):

1) infrastructure latency

2) temporarily heavily unbalanced orders book (2a. temporary vacuum=mostly causing the episodic volatility such as that of chf after snb depegging and you see a broader spread as consequence; 2b. massive disproportion of buys (or sells) compared to sells (or buys) triggering a stop cascade) 

3) delays produced by manipulation (mainly and specifically on news release time)

 
Comments that do not relate to this topic, have been moved to "How to read the slippage tab in signal provider pages ?".
 

I have some questions about slippage and deviation, especially the difference between the two. 

I am testing an EA to autotrade Forex. The timespan tested was from 2010.01.01 to 2015.12.31 The period was H4. The pair was the EURUSD. The code identifies levels of support and they can occur anytime of the day, meaning it does not take into consideration changing liquidity or velocity of price movement based on time of day or news releases. It is dumb to those factors.

Since I am new to Forex, MetaTrader, MQL4 and programming I used some relevant code given in one of the articles. This included extern int Slippage = 2; . The order type in OrderSend is a market buy order.  I tested my EA with Slippage = 2, as well as 0, and got the same result. My demo account is with New York based FXCM, which uses a 5 decimal place point. OrderSend wants an int for its Slippage parameter and the EA doesn't modify the 2 in any way.

Does that mean that OrderSend interprets the 2 to equal 2 pips (.00020) or 2 tenths of a pip (.00002)? 

My second question is: what is the practical difference between slippage and deviation?

Since I got a satisfactory result, I want to launch the EA to test live with demo money in my demo account. In reading the User Guide on how to get ready to do that I am looking at Tools|Options|Trade and see Deviation by default. The default is 10 pips.  The User Guide describes this Deviation field:

  • The symbol price can change within the ordering time. As a result, the price of the prepared order will not correspond with the market one, and position will not be opened. The "Deviation" option helps to avoid this. Maximum permissible deviation from the value given in the order can be specified in this field. If prices do not correspond, the program will modify the order by itself what allows to open a new position.

 MQL4 Reference|OrderSend describes the Slippage parameter:

slippage

[in]  Maximum price slippage for buy or sell orders.

Do my extern int Slippage code and the Deviation setting do the same thing? Is there a difference between how the MetaTrader and broker handle extern int Slippage = 2 and Deviation = 2 ? If they are different numbers does one take precedence over the other? Do I need that extern int Slippage code at all? If I can/should try to regulate the acceptable amount of slippage I think I'd rather do it in extern so I more easily change it in the parameters dialog rather than going into the Options|Trade tab. But what if the setting doesn't match the parameter?

Thanks for any insight 


 
Alain Verleyen:
There is no wrong slippage for limit orders.
i think what he trying say is when you place limit orders before market news are released the limit order might move from its current price due slippage. 
 
Thanks for your reply Francis. Perhaps that is what he is saying, but I'm asking what is the difference between what the slippage parameter in OrderSend does and what the Options|Trade|Deviation setting does in the Client Terminal. How do they operate and how can I use either or both of them to my advantage?
 
gburg14:
Thanks for your reply Francis. Perhaps that is what he is saying, but I'm asking what is the difference between what the slippage parameter in OrderSend does and what the Options|Trade|Deviation setting does in the Client Terminal. How do they operate and how can I use either or both of them to my advantage?
what do you really want to achieve by knowing about slippages in the market.? 
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