Direct answer
Slippage is the difference between the price you expect to get for an order and the price you actually receive when the order is executed. A worked example makes this concrete by showing how a small delay or quote change turns an intended fill price into a worse realized price.
This article uses only hypothetical numbers (no live prices) and states every assumption used in the calculations.
Mechanism or definition
Assume you place an order expecting execution at a particular “reference price.” In practice, the actual fill can differ because of:
- Market movement: prices change between order placement and execution.
- Liquidity and depth: when there is not much volume at the expected level, the next available prices may be worse.
- Execution timing: network delays, platform latency, or queueing can cause the fill to occur after the market has moved.
- Spreads and costs: even if the market mid-price changes little, the bid/ask you trade at and any commissions or fees can affect the realized result.
Worked-example setup (all assumptions):
- You intend to buy at a reference price of 1.2000.
- You are using a buy order, so execution price comes from the ask side.
- There are no additional provider-specific rules beyond “the order fills at the next executable quote.”
- Ignore swaps/holding costs because the focus is execution price.
Evidence or example (worked numerically)
Scenario A: A market moves away before the fill
Assumptions:
- Reference (expected) ask at order decision time: 1.2000.
- Time passes until execution.
- At fill time, the best available ask becomes 1.2006 because quotes moved and earlier liquidity is consumed.
Calculation:
- Expected execution price: 1.2000
- Actual execution price: 1.2006
- Slippage (price difference) = 1.2006 − 1.2000 = 0.0006
To express this in pips for common forex notation, note that with a 1.2000-style price, 0.0001 is typically 1 pip.
- Slippage in pips = 0.0006 / 0.0001 = 6 pips
Scenario B: Spread effect (still slippage by realized execution price)
Some people expect “price” to mean a single midpoint. But a buy typically executes at the ask, so spread matters.
Assumptions:
- At decision time, midpoint is 1.2000 and spread is 2 pips, so ask ≈ 1.2001.
- You expect to effectively get 1.2001 (your reference is the ask).
- At execution time, the spread widens and the ask becomes 1.2004 (midpoint may be unchanged; the execution quote changed).
Calculation:
- Expected ask reference: 1.2001
- Actual ask at fill: 1.2004
- Slippage = 1.2004 − 1.2001 = 0.0003 = 3 pips
How this “works” regardless of cause: In both scenarios, you can compute slippage from the realized execution price versus the reference/expected execution price.
Limitations and risks (material failure modes)
- Unrealistic reference price: If you choose a reference that would never be executable (for example, a midpoint when your order executes at the ask), the computed “slippage” may be misleading.
- Ignoring spreads and costs: Comparing a mid-price expectation to an execution price without accounting for bid/ask differences mixes concepts.
- Assuming stable relationships: Historical patterns between spread, volume, and slippage do not guarantee future results; market microstructure changes.
- Different execution models: Some systems may reject, partially fill, or queue orders; slippage can’t be fully predicted without knowing the execution model.
- Jurisdiction and rules: Execution behavior can differ across venues and regulatory frameworks, so you should not assume one environment’s mechanics apply everywhere.
Verification or next question
To verify a slippage explanation independently, you can:
- Record the reference/expected execution price you used.
- Compare it to the actual fill price reported after execution.
- Convert the difference into pips using the relevant pip size for the quoted instrument.
A useful next question is: What did the platform report as the reference price for your order type (ask/bid, limit level, or midpoint reference)? That detail determines whether your slippage calculation matches how execution truly occurred.