Slippage is the difference between the expected execution price of an order and the price at which it actually fills. It can happen without any system failure: if the quote you saw is gone or does not have enough size, the order must trade against the next available prices.
How it works
A market order prioritizes execution, not a specific price. If you need to buy 1,000 contracts but only 200 are offered at the best ask, the rest may execute at progressively higher prices, producing an average fill above the first quote you saw.
Stop orders are also commonly misunderstood. Once triggered, a stop-market order becomes an order to trade at available market prices. The stop level determines when execution begins; it does not guarantee the final fill when the market gaps or races through several price levels.
Why it matters
Slippage changes the real payoff distribution of a strategy. A backtest that assumes every losing trade exits at exactly -1R can materially overstate expectancy if stressed-market losses often become -1.2R or -1.5R in live trading.
Leverage magnifies the problem. A modest execution difference can become a large percentage of account equity when position size is high or margin is tight.
A simple market example
WTI crude on March 9, 2026 is a vivid recent example. CME reported that the front-month contract gapped higher, traded up to about $119 per barrel, reversed to roughly $81, and settled just under $91. The $38 intraday range was the widest single-day range in WTI history. In a market moving through that many price levels, a stop at $100 does not mean a trader is guaranteed a $100 fill. If liquidity at that level disappears before the order reaches the book, the next executable bids may be materially lower. The risk rule can still work exactly as designed while the realized exit price is worse than the trigger price.
Common mistakes
Assuming every instance of slippage is broker manipulation. Fast price changes and limited depth naturally create execution differences in legitimate markets.
Backtesting with ideal closes while ignoring spreads, commissions, and slippage, which can systematically inflate expected returns.
Frequently asked questions
Can slippage ever be positive?
Yes. You can sometimes receive a better fill than expected, although risk planning should focus on adverse slippage.
Do limit orders eliminate slippage?
They can cap the worst acceptable price, but the trade-off is non-execution if the market moves away.
When is slippage most likely?
Major economic releases, central-bank decisions, geopolitical shocks, market opens, gaps, and sudden drops in order-book depth are common conditions.
Educational content only. Definitions describe common market usage and may vary by jurisdiction, instrument, or institution.