What is slippage in trading?

Every order starts with a price in your head: the quote on the screen, the level in your plan or the stop price you set. Slippage is the gap between that expected price and your average fill price. It is measured per share (or per contract) and becomes a dollar cost once you multiply it by your size.

The SEC’s investor education pages describe the mechanism plainly: a market order generally executes right away, but its price is not fixed in advance, and the last-traded price is not necessarily the price you will get. Slippage is the name traders give to that difference. It exists in every market that trades continuously: stocks, options, futures, forex and crypto.

For a buy order, a fill above the expected price is negative slippage; for a sell order, a fill below it is. The drawing at the top of the page shows both directions for the same hypothetical buy order.

Slippage
The difference between the price you expected for an order and the price at which it actually filled. It can be negative (a worse price) or positive (a better one).
Expected price
The price a trader plans on when sending an order: the quote on screen for a market order, or the stop price for a stop order.
Fill price (execution price)
The price at which an order actually trades. A large order can fill in pieces, so traders use the average fill price.

Positive vs negative slippage: can slippage work in your favor?

Yes. Slippage is just a difference, and it has a sign. Negative slippage means you got a worse price than expected: you paid more on a buy or received less on a sell. Positive slippage means you got a better price: you paid less or received more. Regulators call the favorable case price improvement, an order executing at a better price than the one publicly quoted.

Hypothetical: you send a market order to buy 500 shares with the quote at $40.00. Filled at $40.03, you paid $0.03 a share more than expected, $15 in all. Filled at $39.98, you paid $0.02 less, a $10 saving. On a sell order the signs flip: selling at $40.03 when you expected $40.00 is the good outcome.

The two do not cancel out in practice. A limit order can never fill worse than its limit, so it shows only zero or positive slippage, at the cost of sometimes not filling. Market and stop orders accept whatever price is there, and they tend to be sent exactly when prices are moving fast, so their slippage leans negative. Plan for the negative kind and treat the positive kind as a bonus.

Negative slippage
A fill at a worse price than expected: higher on a buy, lower on a sell.
Positive slippage (price improvement)
A fill at a better price than expected: lower on a buy, higher on a sell.

Why does slippage happen?

A quote is a snapshot: the best bid and the best ask, each good for a limited number of shares, at one instant. Slippage appears whenever the market your order meets is no longer the market you saw. The usual causes are in the list below.

Hypothetical: the best ask is $40.00, but only 200 shares are offered there; 200 more sit at $40.03 and 100 at $40.09. A market order to buy 500 shares takes all three levels: 200 × $40.00 = $8,000, 200 × $40.03 = $8,006 and 100 × $40.09 = $4,009, a total of $20,015. The average fill is $20,015 ÷ 500 = $40.03, so the slippage is $0.03 a share, or $15 on the order.

  • Market orders: they take whatever price is available. The SEC notes that a market order’s price often deviates from the last-traded price or the real-time quote, depending on the liquidity available when it executes.
  • Size against displayed depth: the quoted price holds only for the shares shown there. A bigger order fills the rest at the next prices, as in the drawing below.
  • Thin liquidity: in small stocks, far out-of-the-money options and quiet hours, few shares rest at each price, so even a modest order moves through several levels.
  • Fast markets and news: FINRA notes that in highly volatile markets prices can swing within microseconds, so the quote you saw may not match the price you pay.
  • Gaps: when a stock opens far from its prior close, no trades happen in between, and orders waiting inside the gap fill near the opening price. See the gap trading strategy.
  • The open, the close and extended hours: prices are still settling and fewer participants are quoting; pre-market trading is where spreads and slippage are usually at their widest.
  • Delay: the time between your click and the execution is short but not zero, and prices can change inside it.

Turn your phone sideways to read the image. Tap to close.

On one side, an ask ladder for a market order to buy 500 shares: $40.09 × 100, $40.03 × 200 and $40.00 × 200, with an arrow rising through all three levels and the note the quote you saw: $40.00 × 200. On the other, a card that adds up 200 × $40.00 = $8,000, 200 × $40.03 = $8,006 and 100 × $40.09 = $4,009: total paid $20,015, average fill $40.03, expected $40.00, slippage per share $0.03, slippage on the order $15. A note reads: the quoted price was good for only 200 shares; the rest filled higher.

How do you calculate slippage? A worked example

Three numbers describe slippage. Per share: fill price minus expected price for a buy, expected price minus fill price for a sell. In dollars: that difference times your share count. And as a share of planned risk: the dollars of slippage divided by the dollars you planned to lose if the stop was hit. The third is the one that changes decisions.

Hypothetical trade, continuing the example: you plan to buy 500 shares at $40.00 with a stop at $39.60, a planned risk of $0.40 × 500 = $200, or 1R. Your market order fills at an average of $40.03: $15 of entry slippage. The trade fails, the stop triggers at $39.60 and fills at $39.55 in a quick drop: $0.05 × 500 = $25 of exit slippage.

Total slippage is $15 + $25 = $40, which is 20% of the planned risk. The real loss is ($40.03 − $39.55) × 500 = $240, or 1.2R instead of 1R, before commissions and fees. One trade like that hardly matters. Across a hundred trades, an extra 0.2R on every loss changes what the same strategy earns, which is why costs belong in any trading expectancy estimate.

Turn your phone sideways to read the image. Tap to close.

Two cards and a bar. The plan: entry $40.00, stop $39.60, shares 500, planned risk $200. What happened: average entry $40.03, stop filled at $39.55, slippage $15 + $25 = $40, real loss $240. Below, a bar made of a grey planned-risk block of $200 and two red blocks, entry $15 and exit $25, bracketed as real loss: $240 = 1.2R. A note reads: slippage added 20% to the planned risk, a 1.2R loss instead of 1R.

Slippage on stop orders: why can a stop fill below its price?

A stop order is where most traders first meet slippage. The stop price is a trigger, not a fill price: once the stock trades at the stop, the order becomes a market order and sells at the next available price. The SEC’s glossary warns that the execution price may differ from the stop price, especially in a fast-moving market.

In an orderly decline the difference is usually a few cents, like the $0.05 above. In a gap it can be most of the loss. Hypothetical: the same 500 shares, stop at $39.60. The stock closes at $39.90, bad news arrives overnight and it opens at $38.80. The stop triggers at the open and fills near $38.80: $0.80 × 500 = $400 of slippage on the exit alone. With the $15 from the entry, the loss is $615, about 3.1R on a trade planned to risk 1R.

A stop-limit order removes that price risk by refusing to sell below a limit, and replaces it with the risk of not selling at all while the price keeps falling. The stop order vs stop-limit order guide works through both cases, and stop loss and take profit covers where the stop belongs in the first place.

How do you reduce slippage?

You cannot remove slippage, but most of it comes from a few choices that are yours to make:

  • Use limit orders where missing the trade is acceptable. A buy limit at $40.00 in the example fills 200 shares at $40.00 and leaves 300 waiting; a limit at $40.03 fills 400 shares at an average of $40.015. The price is capped; the fill is not certain. The order types guide covers each order.
  • Trade liquid stocks in liquid hours. Tight spreads and deep quotes mean more shares at each price. The first minutes after the open, the extended sessions and thin names are where the same order slips most.
  • Fit your size to the market. Compare your order with the shares displayed and with the stock’s normal volume; if your order is a large part of what is on the screen, split it or use a limit.
  • Stay out of scheduled news unless the plan is built for it. Earnings and major economic releases are when quotes are pulled and gaps appear; the economic calendar shows the dates.
  • Avoid holding a tight stop through events that can gap the stock, or size the position for the gap rather than for the stop.
  • Put slippage in the plan. Size the trade so that the loss including typical slippage, not the ideal loss, equals your risk limit; the position size calculator does the base math.

How much slippage is normal, and how do you measure yours?

There is no standard figure. Slippage depends on the stock, the time of day, the order type, your size and your broker’s routing, so a published average says little about your own trades. In a very liquid stock during regular hours, a small market order usually fills at or very near the quote; in a thin stock or a fast market, the same order can slip many times that.

The useful number is your own. For every trade, log the price you expected and the price you got, for the entry and for the exit, then express the difference in R. After a few dozen trades you will know your typical slippage by setup and by time of day, and whether a market order or a limit order suits each. A trading journal is the place for it, and paper trading results should be discounted, because simulated fills are usually kinder than real ones.