In finance, Slippage refers to the difference between the expected price of a trade and the price at which the trade actually executes. It can occur in any market and is most common in fast-moving markets where prices can change rapidly, such as the foreign exchange or futures markets. Slippage can happen for a number of reasons, including a lack of liquidity in the market, a large order size, or a volatile market.Examples:1- In the stock market, an investor places a buy order for 100 shares of XYZ stock at $50 per share. However, due to market volatility, the order is filled at $51 per share. The slippage in this case is $1 per share.2- In the forex market, an investor places a market order to buy EUR/USD at 1.2000. However, due to a lack of liquidity, the order is filled at 1.2010. The slippage in this case is 10 pips.3- An investor places a limit order to buy a futures contract at $100. But due to a volatile market, the order is executed at $102. The slippage in this case is $2.Slippage is generally considered negative for traders and investors because it can result in lower profits or higher losses. However, it can also be used as a risk management tool, by placing stop-loss orders to limit potential losses in a volatile market.
