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Slippage

The difference between the price you expected and the price you actually got filled at.

Slippage on a market orderA buy order clears four price levels, so the average price paid is worse than the price first quoted.Buy 1,000 shares at marketpricesell orders resting (bar length = size)20.04300 shares20.03200 shares20.01200 shares20.00300 sharesnothing resting at 20.02order sweeps up the bookaverage fill 20.02SLIPPAGE0.02 a share$20.00 in totalintended 20.00Each level fills at its own price; the average is what you really paid.
Slippage on a market order. You click at 20.00, but only 300 shares are resting there, so the rest of the order fills at 20.01, 20.03 and 20.04. The average price paid is 20.02, and that two-cent gap is slippage.

Slippage happens when a market-order or a triggered stop-order walks through several levels of the order-book, or when price jumps between the moment you click and the moment the order arrives. It is worst in thin markets, at the open, and during news.

It is a real cost that backtests routinely ignore. A strategy with a small edge can be wiped out by slippage alone.

Example: your stop is at $50.00. A bad headline gaps the stock to $48.50 and your stop fills there. You planned to lose $1 per share and lost $2.50: 150% more than intended.

Related: market-order, liquidity, bid-ask-spread, stop-order, fill

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