What is slippage?

Slippage refers to instances where the executed price differs from your requested price. I.e. the price ‘slipped’.

Slippage occurs when your Market Order is triggered and filled at a price different to that which you have requested. The difference may only be minimal, or it could be significant. Price Gaps and increased volatility can result in substantial slippage in some cases.

This is a normal market practice and a regular feature of the foreign exchange markets under conditions such as illiquidity and volatility due to news announcements, economic events and market openings. The slippage can be positive or negative. Slippage can also occur when larger orders are partly executed at tier 2 or even Tier 3 prices (see question What is VWAP).

Although we are not required to do so, we publish our Execution Statistics every year on our website: https://www.fxpro.com/pricing/model

Example:

You have a long (buy) position of 1000 barrels (1lot) of WTI prior to market closing at price $50.00, and you set a take profit at price $50.50 and a stop loss order at $49.5.

However, due to significant news reports over the weekend, at the market opening on Monday, WTI opens with an upward gap at price $51.

Therefore, your take profit order will be triggered once the market reopens (as the price has moved above your take profit level), at the price of $51.00, and will be executed at this price or better.

This is how market gaps and slippage may cause more profit or loss than anticipated and why stop orders such as ‘stop losses’ are never guaranteed to be executed at your requested price.