Slippage is the difference between the price you expected and the price you got. It happens when the market moves faster than orders can be matched at the requested price, most often in fast or thin markets.
When it happens
- Around high-impact news releases.
- At market opens and after weekend gaps.
- In instruments or hours with low liquidity.
- With large orders relative to available liquidity.
Why stops are most exposed
A stop loss becomes a market order when it is triggered. If price jumps through it, the order fills at the next available price, which can be worse. This is one reason prop firms restrict trading around news and over weekends.
How to reduce it
- Avoid holding positions through scheduled high-impact news.
- Trade the most liquid hours of your market.
- Use limit orders for entries when timing is not critical.
- Leave a buffer between your stop and the daily loss limit for occasional slippage.