What is Slippage, and why isn't the price you receive the same as the price you ordered?

I set a Stop Loss at 1.0850 clearly, but when the order actually closed, it was executed at 1.0838, a difference of 12 pips, even though I didn't make any mistakes. Many people encountering this for the first time would immediately think the broker is taking advantage or that the system has a problem.

The truth is, this phenomenon has a name and occurs in all financial markets, not just Forex, and not just with one specific broker.

What is Slippage?

Slippage is the difference between the price you intended to trade at and the actual price at which your order was successfully executed. It can occur with both buy and sell orders, and can result in a better or worse price than intended.

Simply put, during the brief moment between when you submit your order and when the market actually matches it, the price may have already moved. The system must then fill the order at the actual available price at that moment, not the price you saw when you clicked the button.

What Causes Slippage?

There are three main causes, each stemming from different market mechanisms.

Market Volatility

During significant economic news announcements, such as the US Non-Farm Payrolls or central bank interest rate decisions, prices can move dozens of pips within a fraction of a second. Orders placed beforehand therefore have a high chance of experiencing slippage because prices change faster than the system can match them.

Low Liquidity

During Monday morning market openings, the transition period between Asian and European markets, or for less-traded currency pairs (exotic pairs), liquidity is typically lower. When fewer participants are active, buy and sell orders are harder to match, increasing the likelihood of orders being filled at a price further away from the intended price compared to periods of high trading activity.

Broker Execution Types

This point is often overlooked but has the most direct impact. Brokers are primarily divided into two types based on how they handle orders.

Instant Execution: The broker attempts to fill your order at the exact price you see. If the price moves before the system confirms, you will receive a requote, meaning the system asks if you accept the new price. Your order is not immediately filled at a different price.

Market Execution: The broker immediately fills your order at the best available market price at that moment. There is no requote, but this also means the price you get might differ from what you saw when you clicked the button. This is the origin of slippage in the sense most people encounter it.

Most brokers today use Market Execution because it's faster and avoids order rejections, but it comes at the cost of not guaranteeing the final price 100%.

What's the Difference Between Positive and Negative Slippage?

Many people understand slippage to always mean a negative outcome, but in reality, it's price uncertainty that can go both ways. However, people tend to only remember when they experience the negative side because it feels like a disadvantage. When they get a better price than intended, it often goes unnoticed.

How is Slippage Related to Order Type?

The type of order used directly impacts the risk of slippage.

Market Orders prioritize speed over price. You place a buy or sell order immediately at the current market price. The system will fill it as quickly as possible, which means a higher risk of slippage, especially during volatile market conditions.

Limit Orders and Stop Orders prioritize price over speed. You set your desired price in advance. If the market doesn't reach that price, the order will not be filled at all. This method can prevent negative slippage to some extent, but it comes with the risk that your order might not be opened or closed if the price doesn't revert.

For details on each order type and when to use them, read more at How Many Forex Order Types Are There? What's the Difference Between Market, Limit, and Stop?

How is Slippage Related to Spread During News Events?

These two often occur together but are distinct mechanisms. Spread is the difference between the bid and ask prices that exists at all times, while Slippage is the difference between the intended price and the actual filled price.

During significant news events, market liquidity temporarily disappears as many liquidity providers withdraw their orders to observe price direction. The result is a widening spread at the same time prices move rapidly, causing slippage. Both phenomena therefore occur together during such times; it's not a coincidence.

For details on the mechanism of spread and why it widens, read more at What is Spread? How is it Different from Commission?

How to Reduce Slippage Risk

There is no way to eliminate slippage 100% as it's a mechanism of free markets, but you can reduce its occurrence and severity.

Avoid trading during major news events. If you don't have a specific strategy for news trading, waiting for the market to stabilize before entering an order can significantly reduce risk.

Use Limit Orders instead of Market Orders when price is more important than speed. This is if you are willing to miss some opportunities in exchange for a more certain price.

Set slippage tolerance in your platform. Most platforms allow you to specify how many pips of slippage you are willing to accept before an order is rejected rather than filled at too distant a price.

Choose a broker with clear and transparent requote and slippage policies. Slippage tolerance figures and execution policies vary among brokers. You should ensure this before opening a live account, not discover it later. For a step-by-step guide on how to check a broker's reliability, read more at Is Your Forex Broker Reliable? 7 Steps Before Depositing Funds

Frequently Asked Questions (FAQ)

Important Note: Forex trading is not yet licensed or regulated by any authority in Thailand. The Bank of Thailand does not have a policy to issue Forex business licenses to retail investors (Reference: Thai PBS), and the SEC itself confirms that the Forex business is not under the SEC's supervision but rather under the currency exchange control law (Reference: The Standard)

This article is provided for general knowledge only, not as personal investment advice, and does not guarantee any returns. Traders should conduct further research and assess risks independently before making any decisions.

Is Slippage illegal?

No, it's not illegal. Slippage is a normal mechanism of real-time trading markets, not an abnormal action by transparently operating brokers.

Does Slippage occur with all brokers?

It can occur with all brokers that use Market Execution, as it results from market volatility and liquidity, not a problem specific to any single broker. The frequency and severity vary depending on the quality of the liquidity providers each broker uses.

How do I set Slippage Tolerance?

It can usually be set on the order settings page of your platform. You define the number of pips you are willing to accept. If the price moves beyond this value, the order will be rejected instead of being filled at too distant a price. The exact steps vary by platform; you should check your platform's manual directly.

What's the difference between Requote and Slippage?

Requote is when the system rejects the original order and offers a new price for you to confirm again. Slippage is when an order is already filled but at a price different from the one intended. Instant Execution often encounters requotes, while Market Execution often encounters slippage instead.

Summary

Slippage is the difference between the intended price and the actual filled price. It is not an error or an unfair practice by transparently operating brokers, but rather a result of market volatility, liquidity, and the execution type used by the broker.

The key point is that slippage is directly linked to the chosen order type and often accompanies widening spreads during significant news events. Understanding these three mechanisms together helps in planning trades more accurately, rather than viewing them as isolated issues.

Before opening a live account, you should clearly check the execution and slippage policies of the broker you intend to use, as the actual figures and conditions vary from one to another.

References

• Thai PBS: Status of Forex Regulation in Thailand
• The Standard: SEC's Stance on the Forex Business