In plain English
What Slippage means
A displayed quote is not necessarily a guaranteed execution price. Between clicking Buy or Sell and the order reaching an execution venue or dealer, the market may move, quotes may be withdrawn, or the best available size may be used by other orders. Slippage measures that change. It is especially relevant to market orders and to stop orders after they activate.
Why it matters
Slippage changes the effective entry or exit price and therefore the realized trading result. It can be larger during fast markets, news releases, thin trading periods, or when an order is large relative to available liquidity. A stop-loss order may limit a position’s intended exit level, but it does not inherently guarantee an exact fill price.
Example
Suppose a trader sends a market order to buy EUR/USD when the visible ask is 1.08500. The order fills at 1.08518. The simplified slippage is 0.00018, or 1.8 pips, against the buyer. If it instead filled at 1.08492, the buyer would receive 0.8 pip of favorable slippage.
Quick answers
Common questions
Can slippage be positive?+
Yes. Positive, or favorable, slippage occurs when an order executes at a better price than the reference price. For example, a buy order may fill below the displayed ask if prices move favorably before execution.
Does a limit order eliminate slippage?+
A limit order generally sets the worst acceptable price, not a promise of execution. It can remain unfilled or receive only a partial fill if sufficient volume is unavailable at its limit price or better.
Sources