What is Slippage in Trading with Example

Emma Olivia

February 3, 2023

In financial trading, slippage is a term that refers to the difference between a trade’s expected price and the actual price at which the trade is executed. The market Buy and Sell orders are opened at Ask or Bid price. Sometimes the EA tries to open a trade at the current Ask or Bid price that becomes invalid when the request reaches the server. It happens because of the following reasons.

1) Fast Market Move

2) CPU performance

3) Internet speed

4) Efficiency of EA

Example

EA wants to open a buy trade at an Ask price => of 1.14902
When a request reaches the server, now price is => 1.14905
There is a 3 points difference between both prices, this 3 points is the error.

Should EA open this trade or not?

Slippage Explanation

The Slippage is the maximum tolerable error in points.

If Slippage = 5

It means a maximum of 5 points of error can compensate otherwise no trade should be opened.

If we have set a slippage of 3 or more then the Trade in the above example will be taken otherwise the trade will be discarded by the server.

How to choose Slippage?

Normally we have seen that 1-3 points of error may occur. So slippage = 5 is a good value in ideal cases. If you see the error ‘#136 off quotes’ then its time to increase your slippage.

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