Slippage
Slippage is a term used in the financial markets to describe the difference between the expected price of a trade and the price at which the trade is actually executed. It is a common occurrence in fast-moving markets, and can have a significant impact on the profitability of a trade. Slippage can occur when a market order is placed, or when a limit order is placed and the market price moves away from the limit price.
History of Slippage
The concept of slippage has been around since the early days of trading. In the past, traders would often place orders with brokers who would then execute the trades on the trader’s behalf. As markets moved quickly, it was often difficult for brokers to execute the trades at the exact price the trader had requested. This difference in price was known as slippage.
Today, slippage is still a common occurrence in the financial markets. With the advent of electronic trading, slippage has become even more prevalent. As markets move quickly, it is often difficult for traders to get their orders filled at the exact price they had requested. This can lead to significant losses if the market moves against the trader.
Table of Comparisons
| Market Order | Limit Order |
|---|---|
| Price is not guaranteed | Price is guaranteed |
| Slippage is likely | Slippage is unlikely |
Summary
Slippage is a common occurrence in the financial markets. It is the difference between the expected price of a trade and the price at which the trade is actually executed. Slippage can occur when a market order is placed, or when a limit order is placed and the market price moves away from the limit price. To minimize the risk of slippage, traders should use limit orders whenever possible. For more information on slippage, traders can visit websites such as Investopedia and The Balance.
See Also
- Market Order
- Limit Order
- Spread
- Volatility
- Liquidity
- Arbitrage
- Margin
- Leverage
- Short Selling
- Stop Loss Order
