Slippage - What is it and why it is not good for your trading strategies
What Exactly Is Slippage?
The discrepancy between the projected price of a deal and the price at which the trade is executed is referred to as slippage. Slippage can happen at any time, although it is more common during times of high volatility when market orders are employed. It can also happen when a large order is completed but there isn't enough activity at the selected price to keep the existing bid/ask spread.
Main points about Slippage
- Slippage refers to any event in which a market player obtains a transaction execution price that differs from what was planned.
- Slippage happens when the bid/ask spread changes between the time a market order is requested and the time the order is executed by an exchange or another market-maker.
- Slippage happens in all market arenas, including stocks, bonds, currencies, and futures contracts.
What Is the Process of Slippage?
Slippage does not signify a negative or positive movement because it refers to any difference between the expected execution price and the actual execution price. When an order is executed, the security is bought or sold at the best price available from an exchange or other market maker. This can result in outcomes that are better, equal to, or worse than the targeted execution price. Positive slippage, no slippage, or negative slippage refers to the difference between the final execution price and the anticipated execution price.
Most Slippage occurs on Market Orders
Market prices can fluctuate fast, causing slippage to occur between the time a transaction is ordered and the time it is executed. The phrase is used in a variety of market contexts, but the definitions are the same. Slippage, on the other hand, tends to occur in varied situations for each site.
Limit Orders may prevent Slippage
While a limit order minimises negative slippage, it also entails the risk that the trade will not be completed if the price does not return to the limit level. This risk rises when market movements occur more quickly, limiting the amount of time for a deal to be completed at the targeted execution price.
Causes of Slippage in the Financial Markets
Slippage can occur as a result of a rapid shift in the bid/ask spread, which is one of the most prevalent causes. When this occurs, a market order may be executed at a lower or higher price than expected. Negative slippage means that the ask in a long transaction has increased or the bid in a short trade has declined. Positive slippage means that the ask in a long transaction has lowered or the bid has climbed in a short trade. Limit orders and avoiding market orders are two ways market players might protect themselves from slippage.
An Example of Slippage in the Stock Markets
Assume Apple's bid/ask prices are listed on the broker interface as $183.50/$183.53. A market order for 100 shares is placed, with the expectation that the order will be completed at $183.53. However, automated programmes' microsecond operations raise the bid/ask spread to $183.54/$183.57 before the order is completed. The order is then completed at $183.57, with a negative slippage of $0.04 per share or $4.00 per 100 shares.
Slippage is a big problem in the Forex Markets
Forex slippage happens when a market order is executed or a stop loss closes a position at a rate that differs from the rate specified in the order. Slippage is more common in the forex market when volatility is strong, such as after a news event, or when the currency pair is trading outside of peak market hours. Reputable forex brokers will execute the trade at the next best price in both cases.
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Learn more about online trading brokers for UAE citizens and residents.
Best Online Brokers for trading Forex, Bitcoin, CFDs and Stocks in the UAE
Here is a list of top online brokers to open an account for trading Forex, Bitcoin, CFDs and Stocks in the UAE. These brokers have above-average reviews on sites like Reddit, Quora and Trustpilot; and are totally legit, safe and trustworthy for UAE citizens and residents.
The brokers listed on this webpage accept clients from within the United Arab Emirates. Most of these companies provide an online trading platform for fiat currencies (such as Pound Sterling, the Euro, the US dollar, Japanese Yen etc.), buying and selling of cryptocurrencies (for example Bitcoin, Ethereum, Tether, XRP etc.), stocks (this includes listings on Abu Dhabi Securities Exchange, Borse Dubai, Dubai Mercantile Exchange, Dubai Financial Market and NASDAQ Dubai), CFDs (Apple, Microsoft, Amazon, Google, Tesla etc.), UAE government and corporate bonds, and short-term to long-term fixed income securities.
- Olymp Trade - People simply love this one (Olymp Trade Review)
- Binance - World's largest cryptocurrency e-wallet and exchange that also has an online trading platform, where their members can invest or trade in virtually hundreds of cryptocurrencies and new tokens. (Binance Review)
- IG Markets UAE - UK broker located at Tower 2, Level 27, Al Fattan Currency House, DIFC. (IG Markets UAE Review)
- City Index Middle East - London-city broker with a branch in the UAE. (City Index Middle East Review)
- eToro - Social trading platform, but much better options are available out there. (eToro Review)
- Swissquote - It's a Swiss bank that offers an online trading platform for forex and CFD trading. (Swissquote Review)
- easyMarkets - Israeli brand that is big all over. (easyMarkets Review)
- OANDA - American broker that is now spreading its wings. (OANDA Review)
- Forex.com - Google ranks them in the top 10 for the term "forex". (Forex.com Review)
- Plus500 - UK brand that has its own platform, OK for CFDs, with mediocre reviews. (Plus500 Review)
- AvaTrade - Regulated by ADGM's Financial Services Regulatory Authority (FSRA) in Abu Dhabi. (AvaTrade Review)
- FXCM.com - Oldest brand when it comes to retail online forex trading. (FXCM.com Review)
- Mashreq Neo - An online trading platform provided by Mashreq Bank. (Mashreq Neo Review)
- ForexTime (FXTM) - Owned by Andrey Dashin from the Alpari broker fame. (ForexTime FXTM Review)
- Noor Capital - Licensed and Regulated by the UAE Central Bank and SCA. (Noor Capital Review)
- XM.com - XM broker is big in Africa and South East Asia, and now promoting themselves hard in the UAE. (XM.com Review)
- Saxo Bank - Danish Investment Bank with a long history of catering for premium forex investors. It also provides crypto trading facility. (Saxo Bank Review)
- Pepperstone - Originally Australian, but licensed locally by Dubai Financial Services Authority. (Pepperstone Review)
- ADSS - Based out of Abu Dhabi and regulated by the Central Bank of the United Arab Emirates. (ADSS Review)
- CMC Markets - UK-based broker that is popular among CFD traders. (CMC Markets Review)
- Orient Finance - Local online-trading broker that caters to novice traders looking to invest in the foreign exchange markets. (Orient Finance Review)
- Alfa Financial - Their office is located at City Centre Deira on Port Saeed Road; and generally tends to attract investors within Dubai. (Alfa Financial Review)
- One Financial Markets - Local forex broker with an office at Dubai International Financial Centre at Index Tower. (One Financial Markets Review)
- Amana Capital - A broker located at Central Park Towers, Dubai International Financial Center. (Amana Capital Review)
- ETX Capital - UK broker that has a decent reputation among Arab investors. (ETX Capital Review)
- Century Financial - Old online-trading broker with an office at Level 6, Building 4, Emaar Square, Downtown Dubai. (Century Financial Review)
- IFCM UAE - Nothing special about IFC Markets, but it does have a dedicated .AE website for UAE clients. (IFCM UAE Review)
- EARNEX - This one is present at Jumeirah Lakes Towers and is licensed by the SCA. (EARNEX Review)
- Interactive Brokers - American online-trading broker that is expanding into Asian and Arab markets nowadays. (Interactive Brokers Review)
- Rakuten Securities - Japanese broker that usually looks out for large institutional investors. (Rakuten Securities Review)
- Dukascopy Bank SA - Swiss bank that offers online forex trading on its own proprietary platform. (Dukascopy Bank SA Review)
- Gulfbrokers ae - Dubai Multi Commodities Centre (DMCC) regulates this broker, but there nothing extraordinary about this brand. (Gulfbrokers AE Review)
- IQ Option - It's a below-average broker with no Dubai office, but does have a toll-free virtual number for UAE: 800 032 0891 -> No Arabic, English only. (IQ Option Review)
Reviewed by Arpita Singh
Arpita Singh is the main writer at ForexBroker.ae. As a senior investment professional with 10+ years of experience working at top-tier Private Equity and Sovereign Wealth Fund; she is also responsible for fact-checking concepts, reviews, and related details about brokers and exchanges listed on this website. Full Bio.