What is Slippage in Forex Trading and How to Avoid It?
What is Slippage in Forex Trading and How to Avoid It?
Have you ever placed a trade, only to see it open at a different price than you expected? That’s called slippage — and it can affect both your profits and your confidence as a trader. In this post, we’ll explain what slippage is, why it happens, and how you can reduce its impact in your forex trading journey.
What is Slippage?
Slippage happens when your trade is executed at a different price than the one you requested.
Example:
You try to buy EUR/USD at 1.1000, but the trade opens at 1.1003 — that 3-pip difference is slippage.
It can be positive (better price), negative (worse price), or neutral (no change).
Why Does Slippage Happen?
Slippage usually occurs due to:
- High Market Volatility: News events, NFP, interest rate decisions, etc, can cause sudden price movements.
- Low Liquidity: If there aren’t enough buyers/sellers at your desired price, the broker fills your order at the next best price.
- Slow Internet or Execution Delay: Even a small delay between clicking "buy" and order execution can lead to slippage in fast-moving markets.
- Broker Type: Market makers vs ECN brokers handle orders differently. Some brokers even allow you to choose between "slippage allowed" or not.
Negative vs Positive Slippage
| Type | Meaning | Impact |
|---|---|---|
| Negative | Trade opens at a worse price | You lose extra pips |
| Positive | Trade opens at a better price | You gain extra pips |
Most traders only notice negative slippage — but positive slippage is possible too.
How to Avoid or Reduce Slippage
Here are some smart ways to reduce the chance of slippage:
- Trade During High Liquidity Hours: Stick to major market sessions like London and New York overlap.
- Avoid Trading During Big News: News releases like NFP or interest rate decisions can cause wild price swings.
- Use Limit Orders Instead of Market Orders: Market orders get filled at the "best available price" — limit orders only at your set price.
- Choose a Fast, Reputable Broker: A broker with strong execution speed and minimal requotes is essential.
- Use a VPS for Automated Trading: If you use EAs or bots, a VPS ensures faster, stable execution 24/7.
Conclusion
Slippage is a normal part of forex trading, especially in fast-moving markets — but with smart choices and proper risk management, you can reduce its impact.
The key is to understand when and why slippage happens — and to always be prepared for it. Like any part of trading, it’s not something to fear — just something to manage wisely.
