What is Slippage in Trading?
Slippage in trading is when a trade executes at a different price than you expected. It happens because markets move fast and orders fill at the next available price, not always the one you clicked. Slippage can help or hurt your trade, depending on whether you get a better price (positive slippage) or a worse price (negative slippage).
Every trader faces slippage — especially in fast-moving markets like futures, forex, and stocks.
At BluSky, we prepare traders to handle real execution, not just theory. Understanding slippage is part of learning how to manage risk, price movement, and timing in the financial markets.
What Slippage Is in Trading
Slippage is the difference in price between when you place a trade and when it actually executes. The larger the gap between the price you wanted and the price you actually got, the more slippage you experience.
This usually happens during high volatility or low liquidity, when there aren’t enough orders in the market to fill yours at your desired price. For example, if you send a market order to buy at $100 but the price jumps before it fills, you might end up paying $100.25. That’s a small but real cost to your position.
The same thing can happen on a sell order. If you plan to sell at $100 but the market drops before execution, your trade might fill at $99.75 — a worse price that eats into your gain.
Understanding slippage helps traders:
Adjust expectations in fast-moving markets.
Recognize when liquidity is thin and price movement is sharp.
Refine order types and timing to limit the impact on results.
For BluSky traders, learning to manage slippage is a skill that builds consistency and keeps performance grounded in reality — where every price tick and execution detail matters.
Why Does Slippage Happen?
Slippage happens because markets don’t stand still. Prices move constantly as buyers and sellers adjust their orders. When you click to buy or sell, your trade joins a live queue — and by the time it’s filled, the market price may have shifted.
The two biggest causes of slippage are volatility and liquidity.
1. Volatility
Volatility measures how much and how fast prices move. During high volatility, prices can jump in seconds, and orders struggle to keep up. You might send a market order during a major event — like an FOMC announcement or a strong jobs report — and see your trade fill at a different price than expected.
That’s not a platform error; it’s the market reacting to new information. In fast-moving markets, even a fraction of a second can mean a higher price on a buy order or a lower price on a sell order. The faster the price movement, the more likely slippage becomes.
2. Liquidity
Liquidity is the amount of active traders and orders in the market. In low liquidity conditions, there aren’t enough buyers and sellers to match all the trades right away. Your order may have to “skip” to the next available level, filling at a worse price or a better price depending on direction.
For example, during overnight trading or slow sessions, futures and forex markets can thin out. When that happens, even small trades can move price more than usual, creating slippage.
The best way to think about it is simple:
High volatility makes prices move too fast.
Low liquidity makes prices move too easily.
Types of Slippage: Positive vs. Negative
Slippage isn’t always bad news. It simply means your trade filled at a different price than you expected. Whether that’s good or bad depends on which way the price moved.
Positive Slippage
Positive slippage happens when your trade fills at a better price than your requested price.
For example, you place a buy order for crude oil futures at $75.00, but the market dips and fills your trade at $74.95. You just entered the position at a more favorable price.
The same can happen on a sell order. If you plan to sell at $75.00 and your order fills at $75.10, you gain an extra ten cents per contract. It’s small, but over time these details add up — especially for traders focused on precision.
Positive slippage usually appears in markets with high liquidity and tight spreads. It’s most common when your order hits a momentary price improvement or when volatility works in your favor.
Negative Slippage
Negative slippage occurs when your trade fills at a worse price than expected. This is the version most traders notice.
Imagine placing a market order to buy the E-mini S&P 500 at 4500 during a fast-moving market. By the time your order hits the queue, the next available price might be 4501. That single-point difference can turn into a measurable loss if it happens repeatedly.
Negative slippage often strikes during high volatility or low liquidity — when prices move faster than your order can fill. It can also occur around major events like economic reports or interest rate decisions, when everyone’s rushing to enter or exit at once.
You can’t remove slippage entirely. But you can limit how much it impacts your trades by understanding when it’s most likely and what you can do to manage it.
When Slippage Occurs and How to Reduce It
Slippage tends to show up when markets move fast or thin out. Knowing these moments — and preparing for them — can make the difference between a controlled trade and a costly one.
When Slippage Happens Most
During High Volatility
Big price movements happen around major events, such as FOMC meetings, CPI releases, or earnings. These cause heightened volatility and quick swings between buyers and sellers. If you send a market order then, expect a price difference between your screen and your fill.In Low Liquidity Periods
Markets slow down overnight, during holidays, or in thin sessions. When there aren’t enough active traders or orders, prices can skip levels. This makes slippage more likely because your order might have to fill at the next available price.In Fast-Moving Markets
Sudden bursts of activity — especially in forex or futures— can push price several ticks in a second. Even the most advanced systems can’t always fill every order instantly.
How to Reduce Slippage
While you can’t control the market, you can control how you enter it. Here are ways smart traders limit slippage:
Use Limit Orders Instead of Market Orders
A limit order sets the exact price you’re willing to accept. It gives you more control, but the trade may not execute if the market moves away. A market order, by contrast, fills instantly — but can fill at a worse price during high volatility.Trade When Liquidity Is Strong
Stick to times when volume is highest — for futures, that’s during U.S. market hours. More active buyers and sellers mean tighter spreads and fewer gaps.Avoid Trading During Major Events
Unless you specialize in volatility, wait until after key announcements to enter the market. Let prices settle and spreads return to normal.Keep Position Sizes Reasonable
Large orders can move the market in low liquidity conditions. Breaking up your trades into smaller parts helps reduce price impact and unexpected fills.Plan for Slippage in Your Risk Management
Always assume a bit of slippage when setting stops or targets. Building that small buffer helps protect your plan from unexpected execution differences.
These habits don’t eliminate slippage, but they make it manageable. Professional traders expect small price differences — and plan around them instead of fighting them.
Slippage is part of real trading. It’s what happens when markets move faster than orders can fill. Sometimes it helps you; other times it costs you a few ticks.
The key is preparation. By understanding when slippage occurs and how to limit it, you turn it from a surprise into a normal part of your trading routine.
At BluSky, we train traders to handle the reality of execution — not a simulation. You’ll learn how to manage risk, react to price movement, and trade with discipline even when conditions shift fast.
