Forex Trading Learning - What is Slippage?

Slippage refers to the gap between the point where the order is placed and the point where the final transaction is made.

Reasons for slippage

Slippage may be due to network delay, it may be due to the violent fluctuations in the market at that time, or it may be due to the deliberate manipulation of irregular traders. This problem will exist in any platform. This should be explained from the root cause of slippage; the stability of the platform software, the stability of the server, etc. Generally speaking, the above problems can be solved well by regular traders. These powerful traders will not be stingy under the conditions of these hardware facilities.

However, there are many situations that traders cannot control. Slippage occurs. The reason is the liquidity of funds. Generally speaking, retail investors care most about the spread of foreign exchange companies, because the spread is low, and the transaction cost of customers is low. However, many retail investors ignore an important factor behind the price, liquidity. Liquidity is following the quotation. At present, the market is the maximum amount that can be traded. Suppose the price of EUR to USD seen by customers on the platform is 1.3000 and the market can accept the trading volume at this price is 5 million dollars. If the customer orders 6 million dollars, what should I do? Among them, 5 million dollars will be traded at 1.3000, and the remaining 1 million dollars will be traded at the following price, which may be 1.3001 or higher.

It is for this reason that we recommend using a powerful investment platform for trading, which will often reduce the slippage phenomenon on the platform, because large traders can get more favorable prices and larger trading volumes from quoted banks.