Why slippage happens
A market order says "fill me now at whatever is available". If the best offer at your size disappears before your order arrives, the next available price fills you instead. That difference is slippage.
It is not a fee and no one is taking it from you deliberately. It is simply what happens when demand at a price level is bigger than the supply sitting there.
- High volatility — news releases, earnings, macro prints
- Thin liquidity — small-cap tokens, exotic FX pairs, out-of-hours sessions
- Large order size relative to the order book
- Slow connection or a broker routing delay
Positive and negative slippage
Slippage cuts both ways. If the market moves in your favour between the click and the fill, you get a better price than you asked for — that is positive slippage. Brokers that only ever pass on the negative side are worth questioning.
You send a market buy on EUR/USD expecting 1.0850. The fill comes back at 1.0853. That is 3 pips of negative slippage — $30 on a standard lot, before you have even started.
How to reduce it
You cannot remove slippage, but you can decide when you are willing to accept it. Limit orders cap the price; market orders cap the time. Choose based on which one actually matters for the trade.
- Use limit orders when the price matters more than the fill
- Avoid entering in the seconds around a scheduled news release
- Split large orders instead of hitting the book in one clip
- Trade during the deepest session for that instrument
Slippage on stops is the dangerous one
A stop-loss becomes a market order the moment it triggers, so it is exposed to slippage exactly when the market is moving fastest. A stop at 1.0800 in a gap can fill at 1.0760. This is why stop placement and position size have to assume a worse-than-planned exit, not the exact number on the ticket.