Slippage is when your fill price is different from your expected price and it can go both ways, for you or against you.
A high degree of slippage usually happens when the market is Volatile. This could be due to:
- Change in interest rates.
- A major reveal from a company.
- Civil unrest in a country.
It affects all trades at some point, even if you have a stop loss or take profit in place. There are 2 types of slippage:
- Gap Slippage.
- Partial Slippage.
Gap Slippage: When you go to buy or sell your lots, the price fluctuates and the order is changed to the new market price.
The opposite could also happen and the official price for apples goes to $0.75 and your lot/s are sold at the best market price available.
Partial Slippage: Is when there is tight liquidity in the market.
When you go to sell your lots at a certain price however due to liquidity in the market the demand is not there to buy all your lots at the price you would like to sell and there is a dual set of lots in your order goes to the next lot price leaving your average take profit higher or lower than you originally anticipated.
That's why it's important to pay attention to the market and to try and anticipate what is coming next.