Slippage: Why the Fill Isn't the Price

The short answer

Slippage is the difference between the price you asked for and the price you got. Markets move in the interval between your instruction and its execution, so you receive the price that exists on arrival. It runs in both directions, and the amount you are exposed to depends on the order type you chose.

You saw a price. You clicked. The confirmation showed a different number. This is the single most common reason people conclude their broker is cheating them, and it is usually the one explanation that is not required.

What slippage is

Slippage is the difference between the price you asked for and the price you received.

Between those two events, several things have to happen. Your instruction leaves your machine, travels to the broker, is processed, and is matched against whatever is actually available at that moment. This takes time — not much, but more than zero. Markets do not pause while it happens.

If the available price has moved during that interval, you get the price that exists when your order arrives, not the one that existed when you decided. That is slippage. It is not a charge, nobody books it as revenue, and there is no line item for it.

It goes both ways

This is the part that gets lost. Slippage is a difference, and differences have signs.

Sometimes you are filled at a worse price than you asked for. Sometimes you are filled at a better one. The second is called positive slippage, it happens routinely, and almost nobody logs it with the same energy they bring to the first.

That asymmetry in attention is worth naming, because it is how a normal mechanism acquires a reputation for malice. If you only notice the instances that cost you, the pattern will look deliberate. The way to find out is to record both for a while and look at the distribution rather than at the memorable cases.

If the distribution is genuinely one-sided over a decent sample, that is a real finding and worth raising with the firm. But that is a conclusion to arrive at with records, not the assumption to start from.

Why it is larger at some moments

Slippage is small when there is plenty of resting interest close to the current price and large when there is not.

• Around scheduled news. Prices move fastest exactly when everyone wants to act. The distance travelled between instruction and execution is largest here.
• At session edges and in thin hours. Fewer participants, less depth to absorb your order.
• In large size. If your order is bigger than what sits at the best price, it consumes that level and continues into the next. The average fill is worse than the quote, and this happens even in a perfectly calm market.
• In less-traded instruments, where there was never much depth to begin with.

The common factor is depth, which is why slippage and liquidity are really one subject looked at from two angles.

What you can actually do

You cannot abolish slippage. You can decide how much of it you are exposed to, and the controls are unglamorous:

Choose the order type deliberately. A market order is an instruction to trade now, at whatever price exists. It prioritises certainty of execution over certainty of price, and it will accept a bad price to achieve that. A limit order names a price it will not go beyond, and accepts that it may not fill at all. Neither is better; they fail differently. This is the subject of its own article.

Size to the book, not to the ambition. An order larger than the available depth is choosing to pay for the levels beneath.

Do not place market orders into a release for no particular reason. If the timing is not the point of the trade, the cost of that moment is avoidable.

What the firm owes you

There is a formal obligation in this area, and it is useful to know its shape so you can tell what it does and does not promise.

Under MiFID II, firms must take all sufficient steps to obtain the best possible result for clients, weighing price, costs, speed, likelihood of execution and settlement, size, nature and other relevant considerations. Where a client gives a specific instruction, the firm must follow it.

Read that last sentence again, because it is the one that matters here. A market order is a specific instruction, and the instruction says: fill this now. A firm following it faithfully may hand you a worse price than you hoped for, and will have done its job.

So the obligation is real, and it is not a guarantee against slippage. It is a duty about process and outcome taken together — which is also why "best execution" is not the same thing as "best price", and why a fill at an unexpected number is not by itself evidence that anything was done wrong.

Where this sits

Slippage sits alongside the other costs that arrive with it. Its underlying cause is depth, which is covered in liquidity.