Slippage
Slippage occurs when a trade is executed at a price different from the expected price due to market volatility or delays in order execution. It is common in fast-moving markets where the price of a security can change rapidly between the time an order is placed and when it is executed. Slippage can result in higher transaction costs or reduced profits, especially in high-frequency trading environments.
Example
An investor places a market order to buy shares at $50, but due to market volatility, the order is executed at $51, resulting in slippage of $1 per share.
Key points
• Occurs when a trade is executed at a price different from the expected price.
• Common in volatile markets or during periods of high order flow.
• Can increase transaction costs and affect trading profits.
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