What is Slippage?
In short
The gap between the expected price and the actual fill. Larger in fast markets and illiquid stocks.
Also known as: sirpanish
Slippage is the difference between the price you expected an order to fill at and the price it actually filled at. Expect to buy at $50 and get filled at $50.08 — that is $0.08 of slippage. On a sell, filling below the expected price is slippage.
Formula
- For a buy: Slippage = Fill price − Expected price
- For a sell: Slippage = Expected price − Fill price
- Total amount: slippage × number of shares
Why it happens
- Prices move fast. Between sending and filling an order, the price can shift within milliseconds.
- Not enough size. A market order uses up the size at the best price and moves on to the next prices.
- Gaps. If the price jumps over a stop, the stop order fills at the first available price — far lower.
- Low liquidity and wide spreads.
Why it matters
Slippage breaks your planned risk. Plan to risk 1%, and a gap can still turn the loss into 2%. Small slippage, meanwhile, adds up over many trades and eats a noticeable share of results. That is why realistic slippage must be included when evaluating a strategy, especially in a backtest.
A limit order removes slippage but adds the risk of not being filled.
A bad report came out after the close: the stock that closed at $46.20 opened at $41.50. The $45 stop filled at the first available price — $41.50. The planned loss was $3 per share; the real one was $6.50.
Example
Slippage in a gap. A fictional stock: entry $48, stop $45, 200 shares. Planned loss: (48 − 45) × 200 = $600.
After bad news the stock opens at $43 and the stop-market order fills at $42.90:
- Actual loss: (48 − 42.90) × 200 = $1,020.
- Slippage: (45 − 42.90) × 200 = $420.
Everyday slippage. $0.03 on each entry and exit, 100 shares: 0.03 × 100 × 2 = $6 per trade. A hundred trades a year — $600. Add these costs in the profit/loss calculator.
Mistakes and tips
When sizing a position, leave some buffer on the stop distance — gaps and slippage push up your planned risk.
Avoid market orders around earnings and major news: slippage is largest in exactly those minutes.
Record your actual fill prices in a trading journal — knowing your average slippage gives a more realistic view of your strategy's results.
Frequently asked questions
- Can slippage be avoided entirely?
- A limit order guarantees the price, so there is no negative slippage, but the order may not fill. With a stop-market order, slippage cannot be eliminated.
- Is slippage always a loss?
- No, sometimes the price moves in your favour and you get a better fill than expected (positive slippage). In fast markets, though, negative slippage is more common.
Learn it in the Academy
This term is covered with hands-on examples and a quiz in these lessons of the interactive course.
- How the US market worksExchanges and brokers, sessions in Tashkent time, spread and liquidity, five order types with examples, T+1, costs and fractional shares.Open lesson · 12 min
- Earnings seasonCompanies report every quarter: the calendar, consensus, beats and misses, guidance, the conference call, the expected move, gaps and drift, and managing a position into a report.Open lesson · 13 min
- R:R — risk/reward ratioR units, the win rate you need, expectancy and profit factor with numbers; how partial exits change R and how to set realistic targets.Open lesson · 11 min
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