Slippage in Forex - The Threats Traders Face and How to Manage Them

What is Slippage? Meaning and Its Impact on Trading

In financial markets where prices change every second, such as Forex or cryptocurrency markets, the phenomenon traders fear the most is Slippage in Forex – the difference between the expected price and the actual execution price.

Slippage occurs when you place a buy/sell order, but the market price changes before the system executes the order. This results from market volatility, network latency, or sudden release of important news.

Example of Slippage in Forex

Scenario 1: No Slippage

• You want to buy at 1.3650, and the ask price in the market is exactly 1.3650
• The order is filled at the desired price

Scenario 2: Positive Slippage (

• You want to buy at 1.3650, but the ask price changes to 1.3640
• You get a better price by 10 pips

Scenario 3: Negative Slippage )

• You want to buy at 1.3650, but the ask price changes to 1.3660
• You buy at a price 10 pips higher

7 Ways to Minimize Slippage in Forex

Although we cannot eliminate Slippage entirely, following these steps can help reduce its impact:

( 1. Choose a broker with low Slippage rates

Seeking a regulated broker from reputable authorities is the first crucial step. Trustworthy brokers offer ECN accounts connected directly to interbank levels, which typically have less Slippage.

If you notice Slippage occurring more than 1 in 10 trades or the size exceeds the market average significantly, it may be time to switch brokers.

) 2. Maintain and monitor your internet connection quality

Using a wired connection instead of Wi-Fi ###Wi-Fi### can significantly reduce latency. Close other internet-consuming applications like Skype or messengers during trading hours.

For scalpers (short-term traders), ensuring a stable, lag-free connection is essential.

( 3. Set a maximum Slippage limit in your system

When creating a new order, set the “Maximum Deviation” )maximum deviation### from the requested price. If the market moves beyond this limit, the order will not be executed, helping prevent unexpected losses.

( 4. Use Limit Orders instead of Market Orders

Pending Limit Orders allow you to enter the market at a favorable price, especially when your account is connected to interbank levels. Although Limit orders carry a higher risk of not being filled compared to Stop orders, they are a good backup liquidity method.

) 5. Switch to longer timeframes

Scalpers ###Scalping### working on minute charts often experience Slippage frequently. Moving to hourly or daily charts can significantly reduce the impact of Slippage.

( 6. Avoid trading during news releases

The likelihood of Slippage increases dramatically when economic or political news is released. A simple recommendation is: avoid trading 30-40 minutes before major news and wait 30 minutes after the release.

) 7. Choose low-volatility news to reduce Slippage

If you decide to trade during news releases, select events with less price movement. For example, if type A news typically moves 25 pips, but type B moves 50 pips, trading only during type A news will yield better results.

Is Slippage in Forex Normal or a Warning Sign?

Many traders see Slippage as a loss, but in reality, it is a normal phenomenon in markets with liquidity.

Why does Slippage occur?

• True liquidity in Forex markets ###size of 6 trillion dollars### must involve volatility
• All ECN accounts will “experience” Slippage when connected to interbank levels

Therefore, Slippage should not be viewed as a crisis but rather learned to be used to your advantage.

Which currency pairs have the least Slippage?

Under normal market conditions, highly liquid currency pairs such as EUR/USD and USD/JPY tend to experience less Slippage.

However, during major news releases, even these major pairs can experience high levels of Slippage.

Summary

Slippage in Forex is a risk that traders must accept and manage. While it cannot be completely eliminated, there are clear ways to reduce its impact.

The key is: choose a good broker, maintain a stable internet connection, avoid highly volatile news, and set reasonable Slippage limits. By following these practices, you can protect your profits and trade Forex with greater confidence.