Slippage: what your fills really cost

Every strategy document has a line that reads "entered at 1.0850". The chart shows that price, so the

trade looks free. It was not. The fill you actually get is wherever the book is when your order lands,

and the difference between the two is slippage — the cost nobody writes into the plan and everybody

pays.

What slippage actually is

Slippage is the gap between the price you expected and the average price you were filled at. It runs

both ways: a market order in a quiet hour often fills better than the quoted price, and the same order

during a data release can fill several pips worse. What matters for a plan is not the average, it is

the tail. A strategy that pays 0.2 pips of slippage on 95 trades and 6 pips on the other five has a

different cost profile than its average suggests.

The mechanism is simple: a market order does not buy a price, it buys whatever liquidity is resting on

the other side, in order, until it is filled. If your lot size is small relative to the book, that is

one line and the fill is clean. If it is large relative to the book at that moment, your order eats

through several price levels and the last of it is filled worse than the first.

When slippage doubles without warning

Three conditions widen it, and every one of them is predictable:

• Scheduled news. Spreads widen and depth thins in the seconds around CPI, NFP and central bank

decisions. A stop-loss sitting 5 pips away can fill 15 pips away, because a stop becomes a market

order once touched.

• The daily rollover. Liquidity drops for a few minutes as the trading day flips. Small orders are

fine; anything sized for a busy session is not.

• The last hours of Friday and the first of Monday. Weekend risk is priced into the book. This is

the most expensive quiet time of the week.

None of these are surprises. They are on a calendar, which means they can be planned for.

The number to put in the backtest

If your backtest assumes entries at the close of a signal bar, you are assuming free execution. The

honest version includes three adjustments: the spread you cross, the slippage you accept on entry, and

a wider slippage assumption on any stop that can be hit during a release. Adding 2 pips of assumed

cost to a strategy that targets 20 pips removes 10% of its gross edge per trade — which is often the

difference between a plan that survives a test and one that does not.

It is worth running the same test twice: once with zero slippage, once with a realistic figure. If the

result flips from good to bad, the strategy was never about the edge; it was about a spreadsheet

assumption. Our backtesting guide walks through the rebuild, and the

risk of ruin calculator shows what the same edge does over a thousand trades

once costs are subtracted.

Three rules that keep slippage inside the budget

1. Size for the worst hour, not the best one. If your position is uncomfortable to fill during a

quiet London morning, it will be unfillable during a release. Cut the size until the order is small

against the book at the hour you actually trade.

2. Never rely on a stop as your only protection around a release. A stop guarantees the exit, not

the price. If being flat at 14:29 is acceptable, be flat at 14:29.

3. Write the cost into the plan. One line — "assume 1 pip entry slippage, 5 pips on stops during

releases" — and then treat any trade whose edge cannot survive that line as a trade you do not take.

What this changes in practice

Slippage is not a broker's moral failing and it is not avoidable. It is a cost of doing business in a

market where the price is an auction, not a promise. The trader who plans for it loses less than the

one who pretends it away, and the difference shows up in the same place every month: the equity curve.

Education only, never financial advice. Nothing here is a prediction or a recommendation.

Frequently asked questions — Slippage

Is slippage always against me?

No. In quiet conditions a market order can fill better than the quoted price, and limit orders can

fill at the level or better. What you cannot do is assume it: the cost that decides a strategy's

outcome is the bad tail, not the average.

Can I remove slippage entirely?

Not with market orders. You can limit it: trade when depth is present, size small against the book,

avoid the minutes around scheduled releases, and use limits where a missed fill is acceptable. Each of

those is a trade-off, not a free fix.

Why does my stop fill worse than the level I set?

Because a stop becomes a market order the moment it is touched. It guarantees the exit, not the price.

During a release or the daily rollover the price it can find may be several pips away.