{"id":409435,"date":"2021-07-23T07:03:22","date_gmt":"2021-07-23T05:03:22","guid":{"rendered":"https:\/\/ftmo.com\/?p=409435"},"modified":"2022-01-11T17:13:47","modified_gmt":"2022-01-11T16:13:47","slug":"slippage-order-execution","status":"publish","type":"post","link":"https:\/\/ftmo.com\/en\/slippage-order-execution\/","title":{"rendered":"Slippage & order execution"},"content":{"rendered":"
Have you ever experienced an executed order at a different price than your preset SL\/TP? Do you know what happened? Did you think it was a faulty platform mistake? Slippage is easy to understand but can trigger many questions if you are not fully familiar with it. If you want to recognize why slippages happen, when they happen and how to avoid them, you might find this article informative. You will also learn what happens behind the scenes and what journey your order takes when you hit the execution button in the platform until it gets filled.\u00a0<\/span><\/em><\/p>\n After reading this article, you will be able to create a habit to stay aware of:<\/span><\/p>\n Slippage is the difference between the expected price and the executed price. It ensues when the order execution is fulfilled at a different price than requested. Most of the time, slippage can be observed under various circumstances.<\/span><\/p>\n The first is when the market is experiencing low liquidity and this can be observed especially during Market Rollover when major financial institutions in the world are closed. Therefore, markets across the globe lack liquidity and trading during this time may lead to slippage as the counter order necessary to fill the execution request might not be available at the desired price level. Spreads are also higher when liquidity is thin. In the chart below, you can see the market hours of major trading sessions in the world.<\/span><\/p>\n <\/p>\n <\/p>\n The transition between the U.S. session and the Asian session can be considered as the Market Rollover. There certainly are minor financial institutions in the world operating during that one-hour gap such as in New Zealand or in Australia, however, the amount of available liquidity is very limited.<\/span><\/p>\n A similar effect of slippage during the Market Rollover can be also observed in low-liquid assets. In Forex, these instruments are mostly minors or exotic forex pairs that struggle to have a sufficient level of liquidity compared to forex majors. For this very simple reason, such assets tend to experience higher spreads and slippages.\u00a0<\/span><\/p>\n <\/p>\n <\/p>\n Another instance of slippage occurrence is when the market experiences high volatility. We can observe this during significant macroeconomic news releases, such as during the US NFP, as depicted in the chart below. At FTMO, we have identified the major market mover news in the table <\/span>here<\/span><\/a>.<\/span><\/p>\n <\/p>\n <\/p>\n Except for the releases of significant news, there are types of markets that are highly volatile on their own. A great example is the most popular instrument among all cryptocurrencies – Bitcoin (BTCUSD). From the term volatile market, we can already understand that it is a market that experiences drastic fluctuations of price in a short period of time.<\/span><\/p>\n The last instance at which slippage can be expected is a weekend gap. For swing traders who tend to hold their trades for a longer period of time such as days, weeks or months, there is a high chance that a market resumes with a gap. The opening price of an instrument may trigger the Stop Loss\/Take Profit and the trade eventually gets executed at a different price neglecting the SL\/TP. For more information on weekend gaps with examples and statistics that we gathered from our extensive research, you may access <\/span>here<\/span><\/a>.<\/span><\/p>\n So far, we have learnt that an order can be filled exactly at the same price that you requested, therefore, it will not show any slippage. However, on the other hand, there are situations in which the executed price of your order is different which in result leads to two types of slippages \u2013 Positive or Negative. Since there are two market orders to complete a trade, slippage may occur both at the entry, as well as at the exit of a trade.<\/span><\/p>\n Positive slippage happens when a trade is executed (open or close) at a price that benefits the trader.\u00a0<\/span><\/p>\n We recognize two scenarios:<\/span><\/p>\n The above scenarios, as you might have noticed, only illustrate orders at the entry. But what about orders to exit a position? In practice, when you are submitting an order to exit a buy position, you are technically submitting a market order to sell and if the position gets closed on a higher bid price than the price you have expected, you have then received positive slippage at the exit of this buy position. It goes the same way for sell orders as well.\u00a0<\/span><\/p>\n <\/p>\n A less favourable slippage, called a negative slippage, can happen under the same circumstances as the positive slippage when an order gets filled at an unfavourable price for the trader.<\/span><\/p>\n\n
What is Slippage?<\/h2>\n
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Positive Slippage<\/h2>\n
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Negative slippage<\/h2>\n
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