What Is Slippage in Forex? | What Are Forex Signals?

Slippage is the difference between the price you expected to trade at and the price your order actually filled at. It is negative when the fill is worse than expected and positive when it is better.

Why it happens

A market order, or a stop loss that has been triggered, fills at the next available price. If prices move between the moment you send the order and the moment it is filled, or if there is not enough volume at your price, the fill will differ. Slippage is most common:

around major economic releases and central bank decisions;
at the Sunday evening market open, when prices can gap from Friday’s close;
in thinly traded pairs or at quiet times of day;
when many traders send the same order at once, as happens when a signal is posted to a large group.

A tiny example

You are long 0.5 lots of EUR/USD with a stop loss at 1.0820, 30 pips below your entry. A data release sends the price down quickly and your stop fills at 1.0815.

Slippage: 5 pips
Cost at 0.5 lots ($5 a pip): $25
Planned loss: $150. Actual loss: $175, about 17% more than planned.

At one standard lot, the same slippage would cost $50. In a large gap, such as a weekend reopening well beyond your stop, it can be many times the planned risk. See forex signal risks explained.

Slippage and signal followers

Signal followers usually suffer more slippage than the provider, for structural reasons:

Delay. A follower sees the signal after it is sent and acts after that. By then, the price may have moved.
Crowding. Hundreds of followers sending the same order at the same moment can push the price against all of them.
Different brokers. The provider’s quoted entry is from its own broker’s feed; yours may differ.

This is examined with worked numbers in slippage and execution on copied trades.

Positive slippage, and when it is not passed on

Slippage should work both ways: sometimes the market moves in your favour before your order fills. Regulators have fined brokers for keeping the favourable moves and passing on only the unfavourable ones. In 2011 the NFA and CFTC penalised one large US forex broker a combined $8 million for this practice, called asymmetric slippage, and NFA rules now treat such settings as a violation. How brokers handle your orders is covered in forex broker conflicts of interest.

What reduces it

Limit orders, such as a take profit, fill only at your price or better, so they avoid negative slippage at the cost of sometimes not filling. Smaller positions, avoiding entries right at major releases, and not holding large positions over the weekend all reduce exposure to the worst cases.