What Is Slippage in Trading?

Slippage occurs when your trade is executed at a different price than the one you requested. In spread betting, this usually happens when markets move rapidly or there is insufficient liquidity at your chosen price. Slippage can be either positive or negative, meaning you may receive a better or worse price than expected.

For beginner spread bettors, slippage is a normal part of trading financial markets. While it cannot be eliminated entirely, understanding what causes slippage and how to manage it can help you control your risk and avoid unexpected trading costs.

What Is Slippage?

SSlippage refers to the difference between the price at which you place a trade and the price at which the trade is actually executed.

In an ideal world, every trade would be filled at the actual price displayed on your screen. In reality, financial markets move continuously. Between the moment you click “buy” or “sell” and the moment your order reaches the market, prices can change. Market volatility also has an impact on your slippage in trading, when this happens, your trade may be executed at a different level.

For example, imagine that GBP/USD is trading at 1.3500 and you place a spread bet to buy at £5 per point. However, by the time the order is executed, the market has moved to 1.3503.

You have experienced three points of slippage.

Whether this is a significant issue depends on your position size, trading strategy and the prevailing market conditions.

How Does Slippage Work in Spread Betting?

Spread betting providers quote a buy price and a sell price. When you place an order, your broker attempts to execute the trade at the available market price.
If the market remains stable, there may be little or no slippage. However, if prices are moving rapidly, the available price may change before your order can be completed.

In my experience, slippage is most noticeable during:

• Major economic announcements
• Interest rate decisions
• Non-Farm Payrolls releases
• Market opens
• Breaking geopolitical news
• Periods of low liquidity

The faster the market moves, the more volatility you’re likely to experience, the greater the chance that your actual execution price differs from your expected price.

Positive vs Negative Slippage

Many beginner traders assume slippage is always bad, but this is not the case. Slippage simply refers to the price difference between where you intended to execute and where you actually executed your spread bet order. As such, you can have both positive and negative slippage.

Positive Slippage

Positive slippage occurs when your trade is filled at a more favourable price than expected.

For example, if you place a EUR/USD buy order at 1.1500 but the market falls slightly before execution and your order ends up being filled at 1.1498, you have received two points (or pips) of positive slippage.

One caveat here is that while you receive a better price initially, you may end up with a net loss if the market continues to trade heavily against you. So, in the above example, if the EUR/USD kept trading lower and you decide to get out at 1.1480, while you picked up 2 points of positive slippage, you would lose 18 pips on your trade, overall.

Negative Slippage

Negative slippage occurs when your trade is filled at a worse price than expected.

Using the same EUR/USD example where you place a buy order at 1.1500, if the market rises before execution and your order is filled at 1.1504, you have received four points of negative slippage.

From my testing across several spread betting providers, negative slippage tends to attract more attention because traders notice unexpected losses more than unexpected gains. However, both forms occur in live markets.

Worked Example of Slippage in Spread Betting

Let’s look at a realistic spread betting example using GBP/USD.

Imagine you decide to buy GBP/USD at £10 per point with the following trade details:

In this instance, your trade experiences five points of negative slippage. Because you are staking £10 per point, the immediate impact is:

5 points × £10 = £50

Therefore, before the market has even moved, you have effectively entered the position £50 worse off than expected.

Now, imagine the market rises 20 points from your actual entry price of 1.3405 to 1.3425. Your profit would be:

20 points × £10 = £200

However, if you had received your original execution price of 1.3400 and sold at 1.3425, your profit would have been:

25 points × £10 = £250

The five-point slippage has reduced your gain by £50.

This example demonstrates the impact slippage has on your trade, which can add to your overall trading costs when placing multiple spread bets throughout the day if you’re a short-term trader.

What Causes Slippage?

Many factors can contribute to slippage including high volatility, low liquidity, large order sizes, market gaps and execution latency.

High Volatility

Volatile markets often move too quickly for prices to remain constant.

Economic data releases are a common example. When UK inflation figures, employment reports or Bank of England announcements are released, GBP pairs can move dozens of points within seconds.

These situations can cause highly volatile markets, which could dramatically increase your slippage.

Low Liquidity

Liquidity refers to the number of buyers and sellers available in the market. Therefore, when liquidity is low, there may not be enough orders available at your desired price. The impact of low liquidity is heightened if you have a large spread bet order size to place, resulting in slippage.

Illiquid markets often occur outside major market hours, around public holidays, during overnight trading sessions and in less popular financial instruments such as exotic forex pairs or penny stocks.

Large Order Sizes

Larger positions can sometimes experience greater slippage because more liquidity is required to fill the order.

This is generally more relevant to professional traders and institutions that have greater financial resources and/or bigger account sizes, but it can still affect retail traders during volatile conditions.

Market Gaps

A market gap occurs when prices jump or skip from one level to another without trading in between. This frequently happens after weekends, major news announcements or between market closes and opens.

When markets gap, orders may be executed significantly away from your intended price, causing slippage.

Execution Latency

Execution latency is the short delay between the moment you place an order and the moment it is actually filled. In that time, your order has to travel from your trading platform to the market and back, and the price can move before it completes.

This delay is usually a fraction of a second, but in fast-moving markets even milliseconds can be enough to cause slippage.

Can Slippage Affect Stop-Loss Orders?

While stop-loss orders can reduce slippage, they don’t totally avoid it.

A common misconception is that stop-loss orders can guarantee a specific exit price. In reality, standard stop-loss orders only instruct the platform to close your trade once a certain price is reached or triggered.

If the market moves rapidly through that level, your position may be closed at a worse price.

Using a stock trading example, let’s say you place a FTSE 100 stop-loss order at 10,250 and the market gaps lower to 10,240. Your spread bet trade may be closed at 10,240 rather than 10,250, lower than you initially intended.

This is one reason why traders should understand the broader risks associated with spread betting. You can learn more in our guide to spread betting risks.

Guaranteed Stops and Slippage

Some spread betting providers offer guaranteed stop-loss orders.

Unlike standard stop-losses, a guaranteed stop ensures your trade is closed at the exact level you specify regardless of market conditions. This can effectively eliminate negative slippage on exits.

However, guaranteed stops usually involve a premium fee, wider spreads and minimum distance requirements.

In my experience, guaranteed stops can be useful during major economic announcements or when holding positions overnight where the market can gap during times of heightened volatility.

For shorter term strategies like day trading or swing trading where you might be in and out of a trade within the same day, a standard stop-loss order is generally lower cost, which is why many shorter-term traders use one.

Is Slippage More Common in Forex Spread Betting?

Forex markets are generally among the most liquid financial markets as they are the most popularly traded, globally.

Major currency pairs such as GBP/USD, EUR/USD and USD/JPY typically experience relatively low levels of slippage during normal trading hours.

However, slippage can still occur during:

• Economic data releases
• Central bank meetings
• Unexpected news events
• Periods of market stress

From my testing, GBP/USD tends to provide reasonably consistent execution during active London and New York trading sessions, while slippage becomes more noticeable during major news events or in the Asian trading session where there are fewer market participants.

How to Reduce Slippage

While you can’t completely avoid slippage, several practical steps may help reduce its impact.

Trade During Liquid Market Hours

The London and New York sessions typically provide the deepest liquidity for forex spread bettors. This is because all of the major regions are open for trading: Asian, European and U.S. meaning the most amount of market participants will be present.

Higher liquidity generally leads to smoother execution because there are plenty of buyers and sellers actively trading, creating a more efficient market.

Avoid Major News Releases

If your strategy does not rely on news trading, consider waiting until volatility subsides before entering your positions, especially if you don’t want to risk significant losses.

To keep abreast of major news releases, economic calendars can help you identify potentially disruptive events.

Use Limit Orders

A limit order instructs your broker only to execute the trade at a specified price or better, which can help prevent negative entry slippage.

The downside is that your order may not be filled at all if the market never reaches your chosen price level.

Consider Guaranteed Stops

For traders concerned about overnight gaps or major announcements, guaranteed stop-loss orders may provide additional protection, for an added fee in most cases.

Keep Position Sizes Appropriate

Smaller positions generally make it easier to manage your risk and reduce the financial impact of unexpected slippage.

Why Slippage Matters for Spread Betting Strategies

The importance of slippage depends largely on your trading style.

For long-term traders targeting hundreds of points, a few points of slippage may have little impact. However, for short-term traders seeking small price movements, slippage can significantly affect your profitability.

One way to evaluate your trade profitability is comparing your target profit against your slippage.

For example, if you are targeting a 15-point profit and you receive 3 points of negative slippage on entry, you have effectively given up 20% of your target profit before the trade has even begun. This is why slippage can have a significant impact on short-term trading strategies.

Slippage also why many experienced traders pay close attention to how their trades are executed when developing spread betting strategies. As a trader with 20 years of spread betting experience myself, I want to know whether my broker consistently fills orders at the quoted price and how much slippage I will incur when markets become volatile.

If you’re looking to improve your approach, read our guide to spread betting strategies in which we provide additional insights into planning trades and managing risk.

Final Thoughts

Slippage is often mistaken for a fault or error, but it is neither. It is simply an unavoidable feature of live markets.

In principle, slippage is straightforward: your trade is executed at a different price than expected because the market moved before the order could be filled.

Some common examples of where slippage generally occurs are in highly volatile markets, during illiquid market conditions or through the execution latency of the trade itself.

For beginner spread bettors, the most important takeaway is that slippage is not unusual and definitely not a sign that something has gone wrong.

Understanding when slippage is most likely to occur, how it affects profits and losses, and what tools are available to manage it, such as guaranteed stop-loss orders, can help you become a more informed and disciplined trader.

FAQs

Is slippage always negative?

No, slippage can be positive or negative. Positive slippage results in a better execution price than expected, while negative slippage results in a worse price.

Can I avoid slippage completely?

While it can be reduced, you can’t avoid slippage entirely. It is a natural feature of financial markets trading and spread betting. However, trading during liquid market hours and using appropriate order sizes and types may help reduce its impact.

Does slippage happen on every trade?

Not necessarily. Many trades are executed at or very close to the requested price, particularly in liquid markets such as GBP/USD.

Are guaranteed stops worth it?

This depends on your strategy. In my experience, guaranteed stops can provide valuable protection during highly volatile periods but may not be necessary for every trade, particularly in normal market conditions.

Risk Warning: Spread betting is a high-risk investment activity and you can lose more than your initial deposit. The majority of retail investor accounts lose money trading spread bets. Spread betting is not suitable for everyone. Spread-bet.co.uk provides information only and does not provide financial or investment advice.

Tax treatment depends on your individual circumstances and may change. Consider whether you understand how spread betting works and whether you can afford to take the high risk of losing your money before opening a spread bet account.