What is slippage in forex?

Slippage is the difference between the price you expected, either the one on screen or the level of your stop, and the price at which the order was actually filled. It happens when the price moves or liquidity thins between the moment an order is triggered and the moment it is executed: most often around high-impact news, at the weekend open and in thin markets.

How slippage happens

A market order asks for a price; it does not reserve one. In MT5’s Market Execution mode, “a broker makes a decision about the order execution price without any additional discussion with the trader”, and sending the order means advance consent to that price (MetaTrader 5 help). In Instant Execution, the order carries a Deviation: the largest difference from the requested price you accept. A move within it fills at the new price without notice; a bigger one can get a requote instead of a fill.

Stops work the same way. A stop loss is held on the broker’s server and triggers when the bid (for a long) or the ask (for a short) reaches it (MetaTrader 5 help). The level is a trigger, not a price you are owed: once it triggers, the position closes at the next price available, which after a jump can be well past the level.

The usual causes:

• News. A release such as NFP can move the price faster than orders are filled, and the spread often widens at the same moment.
• Gaps. After a weekend gap there are no prices between Friday’s close and the first quote, so a stop inside the gap fills at the first price available.
• Thin liquidity. Around the daily rollover and on holidays, fewer quotes mean bigger jumps between them.

A worked example

The position size calculator gives you the planned figure. Slippage is what can push the real loss past it.

Where you see it in MT5

• The execution mode. Right-click the symbol in Market Watch and open Specification. The Execution line shows Instant, Request, Market or Exchange.
• The fill. In the History tab (View → Toolbox → History), compare the price a position closed at with its stop loss level.

The common mistake

Treating the stop distance as the most a trade can lose. Position size is worked out from the stop, but the loss matches the plan only when the price trades through the stop level without jumping. Around scheduled releases some traders trade smaller or stay flat for this reason.

Slippage and automated trading

An Expert Advisor cannot remove slippage. It can avoid some of the conditions that cause it. By default, PipWarden opens no new trades from 60 minutes before to 30 minutes after a high-impact event for the currencies involved (the news blackout). If you set a spread limit for a pair, the spread is checked when the signal comes in, and the EA compares the live spread with the limit again right before sending the order. A trade blocked by either check is logged as “Spread too wide”.

Neither check changes a trade that is already open. Its stop sits at the broker and fills at whatever price the market offers. More on releases in trading around high-impact news, and on stops that trigger while the chart never touched them in why a stop loss is hit at the bid or ask.