What it means
Slippage is worst on big orders, in thin markets, at session opens and around news.
Example
Market buy 300: 100 fill at 100.05 and 200 at 100.10, an average of about 100.08 instead of 100.05.
In practice
Slippage is a normal trading cost and belongs in every plan. Traders reduce it by trading liquid markets in busy hours, using limit orders for entries and targets, and avoiding market orders in the seconds around major news.
When testing a strategy, add realistic slippage to every stop and market entry. A system that only works with perfect fills will not work with real ones.
What to watch for
Stops slip the most exactly when you need them, in fast moves and gaps, so the real loss on a trade can exceed the planned risk. Size positions with a small allowance for it.
Related terms
3 terms- Market orderAn order to fill immediately at the best available price: it guarantees the fill, not the price.
- Order bookThe live list of every waiting buy and sell order, with the size at each price.
- LiquidityIn SMC, the pools of resting orders, especially stop-losses, that sit beyond obvious highs and lows.