Slippage

Slippage is the difference between the expected execution price of a trade and the actual price received, often occurring in volatile markets or with large orders.

For example, placing a market order for 10,000 barrels of Brent may result in slippage if the market moves during execution, causing a higher purchase price or lower sale price.

Slippage impacts trading costs, P&L, and risk management. Traders mitigate slippage using limit orders, execution algorithms, or liquidity analysis. It is particularly relevant in fast-moving markets, high-frequency trading, or low-liquidity instruments.

Understanding slippage helps participants optimize execution, maintain profitability, and design strategies that account for market dynamics.