How markets work
Slippage
The difference between the price you expected and the price you actually got.
How it works
Slippage happens because the market moves between the moment you decide and the moment your order fills, and because a large order consumes more than one price level in the book.
It is a real cost and usually an invisible one. Commission appears on the contract note; slippage just makes the fill price slightly worse than the screen suggested.
Where it misleads people
Slippage is worst in exactly the conditions people trade most: fast-moving news, the first minutes after the open, and thin securities. Using a limit order caps it, at the risk of not filling at all.
Worked example
You press buy with the ask at 100.00 and fill at 100.06. The 6 cents is slippage — on a 1,000-share order, $60.
Related terms
- Bid-ask spreadThe gap between the highest price anyone will pay and the lowest price anyone will accept.
- Market orderAn instruction to trade immediately at the best price currently available, whatever that is.
- Limit orderAn instruction to trade only at a specified price or better, accepting that it may never fill.
- Market impactThe extent to which your own order moves the price against you as it executes.
- Order bookThe live list of every outstanding buy and sell order, arranged by price.
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Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.