What is Slippage in the Forex Market?

Slippage is one of the many bits of lingo that you’ll often hear traders speak about when trading forex. Like any niche industry, the world of forex is filled with a variety of acronyms and terminology that can often be confusing to newcomers. We’ll demystify this term for you in today’s post so you can realize it’s not so complicated as you may have thought.

How is Slippage in the FX Market Defined?

A simple definition of slippage is the execution of a market order at a different price than what was requested. For example, let’s say you decide to buy EUR/USD at 1.2500 but your trade gets executed at 1.2510. In this example, you experienced 10 points of negative slippage.
Slippage, however, doesn’t always have to be negative, it can work in the favor of traders as well, and is most common when a limit order slips into positive territory.

Why Does Slippage Occur?

Slippage is the function of a normal market, not something to be looked down upon. The reason it happens is that there is not an unlimited amount of liquidity, or pricing, at each price level in the FX market. When there is no more supply for the amount you’ve requested, then the market must drop to the next available price. This situation is most extreme during news events.

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If you are interested in learning more about trading the FX market, looking for a reputable broker or are interested in launching your own IB or broker business, don’t hestiate to contact our team of specialists today!

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