The difference between the expected price of a trade and the actual price at which it is executed.
Slippage occurs when your order is filled at a different price than you expected. It's a normal part of trading but can significantly impact profitability if not accounted for.
Types of Slippage
Negative Slippage
You get a worse price than expected:
- Buy order filled higher than expected
- Sell order filled lower than expected
- Your stop loss triggered at a worse price
Positive Slippage
You get a better price than expected:
- Buy order filled lower than expected
- Sell order filled higher than expected
What Causes Slippage
- Market volatility: Fast-moving markets during news events
- Low liquidity: Thin order books, especially in smaller instruments
- Large order size: Your order is bigger than available liquidity at that price level
- Market orders: No price guarantee — you get the best available price
- Gaps: Price jumps over your stop level (common at market open)
Slippage in Prop Trading
Simulated Accounts
Slippage on simulated accounts is often minimal or zero, which can create unrealistic expectations. Some firms add artificial slippage to make conditions more realistic.
Impact on Rules
Slippage can cause your account to breach drawdown limits even with a properly placed stop loss. If your stop is at $99,500 but fills at $99,450, that extra $50 per contract matters.
How to Minimize Slippage
- Use limit orders instead of market orders when possible
- Avoid trading during high-impact news releases
- Trade liquid instruments (ES, NQ, EUR/USD)
- Use smaller position sizes in less liquid markets
- Account for 1–2 ticks of slippage in your risk calculations