Slippage

The gap between the quoted price and the average price a trade actually achieves, caused by consuming successive levels of the order book.

Example

Selling 300 units into a book quoting 402.00 realised 118,940.00, an average of 396.4667 - a shortfall of 1,660.00, or 1.3765%.

Important

It is charged by nobody and appears on no statement, so it is invisible unless you compute it. The quoted price answers what the next small unit fetches, never what your whole position fetches.

Related terms

• Market depth — How many units are resting as orders near the current price - what a market can absorb before the price itself moves.
• Order book — The live, price-ranked list of all resting buy and sell orders for a security, showing how many shares are available at each level on each side.
• Transaction cost — What it costs to trade rather than to hold: commission, the spread between buying and selling prices, any tax on the trade itself, and the price movement a large order causes.
• Bid-ask spread — The gap between the highest price a buyer will pay and the lowest a seller will accept. A cost paid on every round trip.

Lessons that explain it

• Many venues, no closing bell, no reference price — The quote is for the next unit, not for your position, and there is no official price anywhere. What valuation models exist for this class are contested in a way that a bond discount or an equity multiple simply is not. (12 min)
• Seven questions about one specific asset — What it does, who can issue more of it, who already holds it, how deep the book is, whether the rules can be changed, where you would keep it, and what would tell you that you were wrong. (14 min)
• Total loss is an outcome here, not a tail — Four separate routes lead to zero, none of them exotic. Then the volatility arithmetic, the costs nobody totals, and a tax treatment that can leave a bill in currency against a position that has already fallen. (13 min)
• Appraising one trade: size it from the loss, not from the leverage — Before a currency trade, set how much of your account you will risk, where the trade is wrong, and what the broker and costs add. Position size follows from those, never from the maximum leverage available. (12 min)
• Leverage, gaps, the broker itself, and a tax treatment that depends on the product — The biggest forex risks are leverage and sudden gaps. Costs include spreads and overnight financing, and tax treatment varies widely by product and country. (11 min)

All 578 terms in the Investing glossary