slippage
The difference between the expected price of a trade and the actual execution price, occurring when market prices move between order placement and execution.
Example
“The large market order experienced 0.5% slippage — buying so many shares pushed the price higher before the order was fully filled.”
Memory Tip
SLIPPAGE = the price SLIPS between when you order and when it fills. Bigger orders = more slippage.
Why It Matters
Slippage directly impacts your actual returns on trades and can significantly affect your investment costs over time. Understanding slippage helps you set realistic expectations for your trading results and choose brokers or trading platforms that minimize these execution delays.
Common Misconception
Many people believe slippage only occurs in volatile markets or with large trades, but it can happen on any trade regardless of market conditions or order size. Even small retail trades on liquid assets can experience slippage, especially during periods of high trading volume or when using market orders.
In Practice
Suppose you place a market order to buy a stock trading at 100 dollars per share, but by the time your order executes, the price has risen to 100.50 dollars due to rapid buying activity. You have experienced 50 cents of slippage per share, which on a 100 share order amounts to a 50 dollar unexpected cost in addition to your intended purchase price.
Etymology
SLIPPAGE (a slipping away) — the price SLIPS away from the expected level between order and execution.
Common Misspellings
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See Also
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