What Exactly Is It?
In general, slippage refers to the difference between a pending order and the price that the order was filled or executed – it is a type of Forex trading orders caused by ‘gapping‘ in the markets.
A ‘gap’ in the markets refers to the situation where there is a time delay (even if it is only for a fraction of a millisecond) between the tradable prices and typically occurs under one of these circumstances:
1. During illiquid market conditions – either over a weekend or a break in the trading hours.
2. During volatile market conditions – usually around the release of a major economic news event such as interest rate.
It is common knowledge among experienced traders that slippage occurs naturally and all markets will be subject to slippage from time to time. It is usually seen during periods of extremely high or low volatility and during key news releases or during off market hours, and can work both ways – positively or negatively.