In plain English
What Slippage means
When you place an order, the market may not still be at the quoted price by the time it reaches a counterparty or matching engine. The fill can be better or worse than expected. Slippage is not a separate fee; it is an execution outcome that reflects timing, liquidity, and market movement.
Why it matters
Slippage affects realized entry and exit prices, especially for market orders, fast markets, and thin liquidity. It can widen trading costs beyond the quoted spread and make backtests or strategy assumptions too optimistic if they ignore execution effects.
Example
A trader sends a buy market order when the ask is 1.2050. By the time the order is filled, the best available ask has moved to 1.2053. The order fills 3 pips higher than expected, so the slippage is 0.0003, or 3 pips. This is a simplified example.
Quick answers
Common questions
Is slippage the same as spread?+
No. Spread is the difference between bid and ask. Slippage is the gap between the price you expected and the price you actually got.
Does slippage only happen with market orders?+
No. It is more common with market orders, but limit orders can also experience delayed or partial execution if market conditions change.
Sources