Direct answer
Slippage is the difference between the price you expect an order to be filled at and the price you actually receive. In forex, it mainly appears when an order is executed after the market has moved, so the fill happens at a worse or better price than expected.
Mechanism and definition
To keep the idea concrete, separate three elements:
- Expected price: the quote or price used when you place an order (for example, the last visible bid/ask at that moment).
- Executed price: the price at which the broker or trading venue actually completes the fill.
- Slippage amount: the difference between executed and expected price.
A simple model for calculating the slippage amount (without assuming real-time prices) is:
- Slippage (price units) = Executed price − Expected price
- If the executed price is lower than expected (for a buy), slippage is effectively negative; if higher, it is positive.
In practice, slippage is influenced by time delay (how long it takes from order submission to execution) and by market conditions (how fast prices can change and how much liquidity exists). It can also differ across order types, because some orders may be more sensitive to price movement during execution.
Evidence or example (with explicit assumptions)
Assume a trader submits a market order at an instant when the platform shows an expected price of 1.1000. Now assume that, by the time the order is actually filled, the executed price is 1.0996. Under the model above:
- Slippage = 1.0996 − 1.1000 = −0.0004.
This example does not claim that such prices will occur; it only shows how the definition turns into a numeric difference. In real markets, the “gap” exists because execution happens across moments of changing quotes and varying availability of counterparties.
Limitations and risks (material failure modes)
Slippage is not something you can reliably predict from past behavior alone. Several limitations matter:
- Variable market speed: during fast price changes, the same order can experience different slippage outcomes.
- Liquidity gaps: when there are fewer available trades at or near the expected price, fills may occur farther away.
- Execution and cost effects: even if slippage is small in price terms, overall outcomes can still differ because trading costs and spreads are part of what you ultimately pay or receive.
- Direction and sign confusion: people often remember “slippage is bad,” but it can be positive or negative depending on whether the executed price is better or worse than expected.
Because of these factors, slippage introduces uncertainty into realized execution quality.
Verification and next question
To independently verify the concept, you can compare for a specific order the platform’s recorded placed/expected price and the filled/executed price, then compute the difference using the formula above. If the executed price differs, that difference is slippage by definition.
Next question to consider: what execution details does your platform record for each order (expected/limit/filled prices, timestamps), so you can measure slippage consistently across different conditions?