Understanding slippage | Understanding trading costs

The price shown when you place an order and the price at which it fills may differ. That difference is called slippage.

The idea

Slippage can be favourable or unfavourable. It can occur when prices change between the order request and execution, or when there is not enough liquidity at the expected price. Market orders prioritise execution rather than a guaranteed price. A limit order sets an acceptable price but may not fill, and a stop order can execute beyond its trigger.

Apply the idea

Suppose you expect to buy at 100.00 but the order fills at 100.03. The unfavourable difference is 0.03 per unit. For 10 units, that is 0.30 compared with the expected price, before other costs. If the order instead filled at 99.98, the difference would be favourable by 0.02 per unit.

Key takeaway

Check the order type and actual fill. Slippage is an execution difference, and its effect can be positive or negative.