Slippage is the difference between the expected price and the actual execution price. It occurs when orders are executed at a price different from what was requested. Slippage can occur under various conditions:
Low market liquidity: This can be observed during market rollover periods when major global financial institutions are closed.
Trading during times when global markets have low liquidity may lead to slippage. The main reason for slippage is the absence of opposite orders at your desired price level when fulfilling your trade order. Spreads also tend to be higher during periods of low liquidity.
Low liquidity currency pairs (minor & exotic forex pairs): These are more likely to experience spread widening and slippage.
Weekend gaps: For swing traders who hold positions for longer periods (days, weeks, months), when the market opens with a gap, the opening price of the pair may reach the Stop Loss/Take Profit level and execute at a different price regardless of the SL/TP price level.
Volatile market conditions: During and after high-impact macroeconomic news releases such as NFP, CPI, etc., the market can move sharply, causing slippage.
Positive Slippage
Positive slippage occurs when a trade is executed (opened or closed) at a price more favorable to the trader.
There are two scenarios:
When you press the Buy button and the Ask price decreases. In other words, by opening a buy order, your trade opens at a lower price than the order price, giving you the potential for greater profit.
When you press the Sell button and the Bid price increases. In other words, by opening a sell order, your trade opens at a higher price than the order price, giving you the potential for greater profit.
The above scenarios demonstrate entry points, but similar situations can occur when exiting trades. When closing a buy (long) position, you're essentially placing a sell order, and if the trade closes at a higher price than expected, you've experienced positive slippage. The same applies to sell (short) position
Negative Slippage
Negative slippage occurs when a trade is not executed at the desired price.
There are two scenarios:
A buy order at a specific price level is executed higher than the expected price.
A sell order at a specific price level is executed lower than the expected price.
The main reason for slippage is simple: it takes time for an order to reach the server and be executed. This means your order needs to be matched with available price offers from liquidity providers or market liquidity. The time it takes for an order to reach the server creates conditions for slippage.