What is Slippage? Definition of Forex Slippage

Slippage is a familiar term in the financial market, especially in Forex. It is a common phenomenon where the executed price of an order differs from the initially expected price. So, what is slippage? Why does it occur, and how can you minimize the risks associated with slippage?

Let’s explore this in detail in the following article with FOREX89.

What is Slippage in Forex?

Slippage in Forex is the difference between the order price and the actual price at which the order is executed. This difference can be either positive or negative, depending on market conditions and price volatility at the time of the trade.

Slippage occurs when there is high volatility or low liquidity, causing prices to move faster than the system can process orders.

Why Does Slippage Occur in Forex Trading?

There are several main reasons why slippage occurs, including:

• High market volatility: When significant news or major economic events occur, prices can change rapidly, causing your order to be executed at a different price.
• Low liquidity: If the currency pair you are currency trade has low liquidity, the number of buyers and sellers is limited, leading to greater price discrepancies.
• Order execution speed: During periods of high market volatility, the processing speed of trading systems may lag, resulting in slippage.

How to Minimize Slippage in Forex Trading?

Although slippage cannot be completely eliminated, you can take several measures to reduce its risks:

• Trade during high-liquidity hours: Major currency pairs tend to have better liquidity during the London and New York trading sessions.
• Use limit orders: Instead of using market orders, limit orders help you control the price at which your order is executed.
• Avoid trading during major news releases: Times of significant economic news often bring high volatility, increasing the likelihood of slippage.
• Choose a broker with fast execution speed: A reputable broker with advanced technology can help reduce slippage.

Slippage is an unavoidable part of Forex trading, but understanding its causes and how to mitigate it can help you manage risks more effectively. Choosing the right trading hours, using limit orders, and selecting a reliable broker are effective methods to minimize the impact of slippage. Stay updated with market news and apply suitable strategies to protect your trading account!

Adam Mass

Adam Mass is the CEO of Forex89.com and a leading financial expert specializing in Forex trading and investment strategies. With extensive experience in global markets, he has built a reputation for providing in-depth market analysis and innovative trading solutions. Under his leadership, Forex89.com has become a trusted platform for traders seeking insights, education, and cutting-edge financial tools. Email: [email protected]