After going through this article, you'll be equipped to establish a habit of staying informed about why your order has slipped in price and execution and the following key point below:
Market Rollovers
Significant News Releases
Volatile Markets
Low-Liquid Assets
Weekend Gaps
Understanding Slippage
Slippage in financial markets denotes the difference between the requested price of an order and the executed price. In simpler terms, it occurs when a trade is executed at a price different from the one specified. Initially, slippage may seem like a trading error.
There are instances when slippage is more likely to occur:
Low Liquidity During Market Rollover: Especially when major financial institutions globally are closed, leading to a lack of liquidity and potential slippage due to unavailable counter orders.
Low-Liquid Assets: Certain Forex instruments, often minors or exotic pairs, struggle with liquidity, resulting in higher spreads and slippages.
Highly Volatile Markets: Cryptocurrencies like Bitcoin are examples of instruments prone to significant price fluctuations in short timeframes.
Weekend Gaps: For swing traders holding positions over longer periods, a market may open with a gap, triggering Stop Loss/Take Profit orders at different prices.
Types of Slippage
Positive Slippage: Occurs when a trade is executed at a price more favorable to the trader, either on a buy order below the trigger price or a sell order above it.
Negative Slippage: Less favorable, happens when a trade is executed at a price less favorable to the trader, such as a buy order filled above the expected price or a sell order filled below it.
Spread Widening
Understanding the spread (the difference between Ask and Bid prices) is crucial. Spreads tend to widen during high volatility or low liquidity, impacting the execution of trades.
Live Execution vs. Instant Execution
Live Execution: Reflects accurate market conditions, considering the market depth, liquidity providers, and order book.
Instant Execution: Ignores liquidity providers and market data, providing quick confirmations but lacking the realism of live market conditions.
At WeMasterTrade, even demo accounts emulate live execution, ensuring traders experience market conditions authentically.
Conclusion
Slippage, while often seen negatively, can also be a positive outcome. Its occurrence is influenced by various factors, including market conditions, news releases, and asset liquidity. WeMasterTrade prioritizes providing traders with optimal conditions and education to enhance their understanding of trading realities. Whether it's a positive or negative slippage, our goal is transparency, and our Support Team is ready to address any concerns or misunderstandings traders may have regarding their trades.