For Business

Risk & Money Management

How to Reduce Slippage Risk

Slippage is the difference between the price you asked for and the price you were given, because a market order takes the next price available rather than the last one seen, and its size depends on how fast the price is moving in the second between. This paper shows you a fill on the euro against the dollar in example figures; the idea as boarding a bus that has started to move; one real five-minute bar on 23 March 2026 that covered 132.6 pips; how far five minutes moves the euro at each hour of the day, from the real bars; and the Deviation field on your platform, which caps the slippage a market order will accept, beside the limit order that has none.

Difficulty
Intermediate
Reading time
5 min
Pages
8
Reviewed by
Saman Rahbar

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A fill, and the gap in it

A market order does not buy at the price on the screen. It buys at the next price available, and the difference is slippage. In example figures, the screen showed 1.17166 when the button was pressed and the fill came at 1.17170: 0.4 pip, 1.60 dollars at 0.40 lot. How big the gap can be depends on how fast the price is moving in the second between the press and the fill. In a quiet hour the whole of a five-minute bar is about a pip and a half. At 13:05 on 23 March 2026 one five-minute bar on the euro covered 132.6 pips, and an order sent inside it could have filled anywhere in them.

A bus that has started to move

Picture a bus that has started to move. The stop is the price on the screen; the bus is the price when the order reaches the broker; and the yards between them are the slippage. On a quiet street the bus has barely moved and you board almost at the stop. On a fast road, a busy hour or the minute after a news release, it is further away by the time you reach it, and you board wherever it is. The order does not wait for the bus to come back. It boards the price that is there, and reducing slippage is mostly a matter of which roads, and which minutes, the order is sent on.

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