What is slippage and why does it happen?
Slippage is a factor when trading any financial market.
Slippage occurs when the market gaps over prices or because available liquidity, at a given price, has been exhausted. Market gaps normally occur during fast moving markets when a price can jump several pips without trading at prices in between. Similarly, each price has a certain amount of available liquidity. For instance, if the price is 50 and the available liquidity at 50 is 1 million, then an order of 3 million will get slipped, since 3 million is more than the 1 million available at the price of 50.
Slippage can be negative or positive. To learn more about positive slippage watch the video below.
To learn how to minimise negative slippage on market orders, visit FXCM's Forex Price Improvement page.