Slippage in Forex

Slippage in Forex

Slippage in Forex

Here we will look at the concept of Forex slippage. It is worth noting that this very slippage in Forex occurs quite often. For example, a trader observes an upward trend and is going to buy GBPUSD at the price of 1.2395 on the pullback. The deal opens, but not at this price, but at a completely different 1.2398. Where did plus three points come from?

Perhaps, at this time, some important news came out on the financial market, or a Forex broker specifically creates such a situation. Absolutely not. This is Forex slippage.
What is slippage in the Forex market?

So, here we will look at what is slippage in trading, why it occurs and how to deal with it. Thus, slippage on Forex can be called the difference between the price that was taken into account when opening an order and the price at which the transaction was executed.

Let's assume that you need to buy an asset at the price of 1.2395. We click on "Buy", but the Forex order was opened at the price of 3 points more, that is, at the price of 1.2398. Just these three points are the size of the slippage in Forex.

By the way, Forex slippage can be not only negative, but also positive.

In addition to price slippage, slippage or slippage can occur with take profit and stop loss orders. Even pending orders may show slippage, but this deviation is insignificant.

So, we found out that Forex slippage can happen at any time. To remember what slippage is - when the price “slides".

what is slippage in trading?

Apart from the concept of slippage, there is a requote – requote) - this is the absence of a price during a request from the trader. For example, there was a message that you can buy an asset, but at new prices. The trader presses buy, but is told that this price is no longer available. This is what is called a requote. If you set the slippage parameters correctly, you can avoid dealing with requotes during trading.
Bad there slippage in Forex?

Most of the traders think that Forex slippage is a bad thing. Thus, it seems that the broker is carrying out fraud with the trader's account. In fact, there is nothing wrong with slippage. On the contrary, it indicates the reality of the market. That is, trading is conducted on the interbank market. Often, slippages can be observed on Standart, STP, ECN, NDD and other trading accounts that depend on the size of the trader's position.

To sum up, it is safe to say that the presence of slippage in the Forex market is normal.
Which leads to slippage?

The result of the market performance can be considered as a slippage. A series of sell and buy orders is called a market execution.

Due to the increased demand for the current price, there is no lot left for us. Our broker provides us with a new price. And we, in turn, buy on it or not. For example, if lots at the price of 1.2395 are sold, the broker will automatically offer us to buy at the next price of 1.2396, 1.2397, until it suits us.
How to beat Forex slippage?

forex slippage

You don't need to fight slippage, you need to accept it and work with it.

The technical aspect is the first thing that every Forex trader should pay attention to. Good Internet and wired connection. Wi-Fi does not always provide the user with a high-quality connection. In addition to the terminal, you should try not to run any third-party programs that may affect the network. This is especially true for professional scalpers. Not hard to imagine how too much of a distraction from trade programs like Skype, of viber, different torrents, games, etc. If the market is not scalped, then a stable Internet connection is enough.
Settings in the MT4 terminal. If you click on F9 to open a new order, then in the window below you can see the value "Use the maximum deviation from the requested price". There you can set the maximum allowed value of slippage in points. If the slippage is greater than the set value, the order will not be opened. It is important to note that this option does not always work. This is due to some technical features of MetaTrader 4 and broker servers.
Limit pending orders. We all know that there are several types of pending orders (Buy Limit/Sell Limit and Buy Stop/Sell Stop). Pending orders with the prefix "Stop“, slippage on them is very rare, which can not be said about orders with the prefix”Limit".
Trading on higher timeframes. Forex slippage even by 1 point will be well felt on the M5. However, when trading on Forex charts D1 (day) slippage even in the amount of 5 points, some role for the trader will not play.
Do not enter the market during the news. Often, liquidity increases significantly during the news, and along with it, the slippage in Forex increases. Therefore, if you want to avoid slippage, it is better to refrain from trading 30 minutes and half an hour after the news release. This is how we solve the issue of liquidity.
Change of broker or trading account. There are two ways to go here: change the Forex broker or the type of trading account. This point is not without some skepticism. If you frequently change the types of accounts and brokers, you can spend time and money.
Filtering out volatility. During the exit, Forex volatility increases, and with it, Forex slippage. Therefore, to avoid large slippage or the presence of requotes, it is better to skip such moments. If it is known that the average slippage during the absence of any news is approximately 2 points, then it is best to trade when there is no news.

Conclusion

In this article, we looked at the concept of slippage in the Forex market, found out whether it is good or bad. It is not necessary to fight slippage, it is better to adapt trading to this phenomenon. There is no slippage in Forex at higher time intervals. However, when trading on small timeframes, you can apply a number of actions described above.

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