What is Slippage?
Slippage is the difference between the expected price of a trade and the actual price at which it executes, typically occurring during periods of high volatility or low liquidity.
Slippage Explained
Slippage is an unavoidable cost of trading that can significantly impact returns over time. It's worst during market opens, around earnings announcements, and in illiquid stocks. Using limit orders instead of market orders can help control slippage, though at the cost of possibly missing fills.
Real-World Example
You place a market order to buy a stock when the quote shows $50.00. By the time your order reaches the exchange, heavy selling has pushed the price to $50.25. Your fill is $0.25 worse than expected — that's slippage.
Related Terms
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