Slippage

The difference in the expected price and the actual price. In other words, slippage is when an order fills at a different price than you expected. Slippage is the result of market volatility.

Why it matters

Slippage can erode the edge your risk management provides. For example, you are in a trade long and decide its time to get out. You trigger a sell at, say $90 dollars. Depending on volatility and liquidity, you order could slip to $89, $88, or worse.

The existence of slippage means it's impossible know your risk:reward with certainty.

How to reduce slippage

1. Pick the right securities - Securities with high volume are less likely to slip as there are simply more buyers and more sellers to fill your orders.
2. Avoid extreme volatility - Slippage is a symptom of high volatility, and therefor it is far more likely to occur in highly volatile markets.