What Is Slippage?
Slippage is the difference between the price you expected and the price you actually received.
If the screen shows $100, that does not mean your order will fill at $100. It may be the last traded price, or only a small amount available at the best ask.
The displayed price is information, not a promise.
A Simple Order Book Example
Suppose the sell side looks like this:
| Price | Available Size |
|---|---|
| 100.00 | 10 shares |
| 100.10 | 30 shares |
| 100.30 | 60 shares |
If you place a market order for 10 shares, you may fill near 100.00.
If you place a market order for 100 shares, you consume all three levels:
10 shares × 100.00
30 shares × 100.10
60 shares × 100.30
Your average fill is not 100.00. It is 100.22.
That difference is slippage.
When Is Slippage Most Visible?
- Low trading volume
- Wide bid-ask spreads
- Order size too large for available depth
- Fast price movement
- News, earnings, or data-release windows
A common beginner mistake is watching price movement but ignoring whether their own order can move the fill price.
Market Orders vs. Limit Orders
A market order prioritizes execution, not price.
A limit order prioritizes price, not execution.
For a small order in a very liquid ETF, a market order may be fine. For thin stocks, long-tail tokens, or event contracts, a market order can fill at a much worse level.
5 Checks Before Placing an Order
- Check whether the spread is an acceptable cost.
- Check whether the first few order book levels have enough size.
- Use a limit order to define your worst acceptable price.
- Split larger orders instead of sweeping the book.
- If news just hit and prices are unstable, wait if you do not need speed.
If you cannot read the order book, start small.
Quiz
Q1. What is slippage?
A. A fee B. The gap between expected and actual fill price
C. A tax D. A fixed platform charge
Q2. What is the main feature of a market order?
A. It guarantees price B. It prioritizes execution but not price
C. It never has slippage D. It only works for ETFs
Q3. What can reduce slippage?
A. Ignoring the order book B. Using limit orders and splitting size
C. Always chasing price D. Only watching the last traded price
Answer Key
Q1: B Q2: B Q3: B
Further reading: Investopedia — Slippage · Investor.gov — Types of Orders
For education only. Actual fill prices depend on market liquidity.
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