Slippage and why fills differ from the price you saw
Slippage is the gap between the price you clicked and the price you actually got. Learn what causes it, when it grows in fast or thin markets, and how order type changes it.
Part of the Market Mechanics: Orders and Execution track on Agenticks. About 9 minutes, written for a intermediate reader.
You click buy at a price you can see on the screen, the order goes through, and the confirmation shows a slightly different number. That gap has a name: slippage. It is the difference between the price you expected when you sent an order and the price the order actually filled at. It is not a glitch and it is not your broker cheating you. It is what happens because a quote is a moment in time, and your order arrives a moment later.
Two things create slippage. First, the market keeps moving. Between the instant you click and the instant your order reaches the exchange, other people are trading, and the best available price can shift. Second, your order may be bigger than the size resting at the best price. If you want a hundred contracts but only twenty are offered at the top level, the rest of your order takes the next level, then the next, and your average fill price drifts away from where you started. Both effects push the real price away from the quote you saw.
The quote is a snapshot, the fill is the truth
The number on the chart is the last trade or the current best quote. It is a snapshot of one instant. The fill is what actually hit your account, and it is the only price that matters for your result. Slippage is just the distance between those two. In calm, busy markets the distance is tiny. In the wrong conditions it can be much larger than the spread you were watching.
Slippage is not constant. It grows in two situations that often show up together. A fast market is one where price is moving quickly, usually around news, the open, or a sudden shift in sentiment. The quote you read goes stale in milliseconds, so by the time your order lands the price has already moved on. A thin market is one with little resting size at each price, which is low liquidity. There your order has to walk through several levels to get filled, and each level is a worse price. Put a fast market and a thin market together, for example the first seconds after an earnings release, and slippage can be at its worst.
Your order type chooses which risk you take
A market order prioritizes getting filled, so it accepts whatever prices are available right now. That speed is exactly what exposes it to slippage. A limit order sets the worst price you will accept, so it cannot fill worse than your limit and it removes that slippage risk. The catch is that a limit order can sit unfilled if the market never trades at your price. So you are not removing risk, you are choosing between two kinds: the risk of a worse fill, or the risk of no fill at all.
Two more things shape how much slippage you actually pay. The first is your order size relative to the market. A small order that fits inside the size resting at the best price barely moves anything, so it fills near the quote. A large order, or one that is big compared to a thin book, has to consume several levels, and the bigger it is the further it walks. The second is how often you trade. A tiny gap per fill feels like nothing once, but multiply it across hundreds of trades and it becomes a steady drag on results, the same way a wide spread or a per-trade fee does. This is why frequent, fast strategies care about slippage far more than someone who buys and holds for years.
One honest point worth keeping. Slippage can technically go either way. Sometimes the market moves in your favor between the click and the fill and you get a slightly better price, which is positive slippage. But in fast or thin conditions, the move that triggered your urgency is usually still running, so the odds lean against you. That is why slippage shows up as a real cost in careful backtests and live trading, not a coin flip you can ignore. A test that fills every order exactly at the quote will look better than reality, and the difference is largest for the fast, high-frequency ideas that look most attractive on paper. Treating slippage as zero is one of the quiet ways a backtest fools the person who built it.
In which situation would you expect slippage to be largest? A large market order in the first seconds after a surprise earnings release This combines a fast market (price moving quickly) with thin liquidity and a big order. All three push the average fill away from the quote, so slippage is at its worst.
- Slippage
- The gap between the price you expected and the price you filled at
- Fast market
- Conditions where price is moving quickly and quotes go stale fast
- Thin market
- Little resting size at each price, so orders walk through levels
- Limit order
- An order capped at the worst price you will accept
- Usually more slippage
- A sudden news spike with price moving fast, A thin book with little size at each level, An order that is large relative to resting size
- Usually less slippage
- A deep, liquid market with size at every level, A calm period with price barely moving, A small order well within the size at the best price
Trace how slippage builds on a market buy order in a thin, fast book. Put the steps in order.
- You read a quote and click buy at that price
- By the time the order arrives, the best price has already moved
- The size at the best price fills only part of your order
- The rest of the order takes the next levels at worse prices
- Your average fill ends up away from the quote you clicked
expected filled fast thin
You understand why fills drift
You know that slippage is the gap between the quote and the real fill, that it grows in fast or thin markets and with large orders, and that order type decides whether you take slippage risk or fill risk.
Common questions
- What is slippage in trading?
- Slippage is the difference between the price you expected when you sent an order and the price your order actually filled at. It happens because the market moves between the click and the execution, and because a large order can take several price levels to fill.
- When does slippage get worse?
- Slippage grows in fast markets, where the price is moving quickly, and in thin markets, where there is little resting size at each price. Big news, the open, and large orders relative to available liquidity all make it larger.
- Can a limit order eliminate slippage?
- A limit order caps the price you will accept, so it removes the risk of a worse fill than your limit. The tradeoff is that it can sit unfilled if the market never reaches your price, so you trade slippage risk for fill risk.
Terms defined in this lesson
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