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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.

VIDEOHow do Price Improvements Work? (02:21)

To learn how to minimise negative slippage on market orders, visit FXCM's Forex Price Improvement page.