slippage

Slippage is the difference between the expected price of a trade and the price at which it is actually executed. It can occur in any market where prices move between decision and execution. Slippage can be positive or negative; negative slippage means the execution price is worse than expected, while positive slippage means a better price than anticipated.

In financial markets, slippage results from liquidity and volatility, order size relative to market depth, and delays in order routing or processing. Market orders are most susceptible; limit orders can cap slippage but may not fill. Illiquid assets or markets with rapid moves increase slippage risk.

Slippage is usually measured as the price difference or realized cost relative to the expected execution. For example, a trader who expects to buy at 50.00 but fills at 50.25 incurs 0.25 slippage per share, or $25 on 100 shares. It can also be expressed as a percentage of notional value.

Mitigation strategies include using limit orders, breaking large orders into smaller executions, and employing algorithmic execution methods such as VWAP or TWAP. Traders may also choose venues with higher liquidity, adjust timing, or set slippage tolerance parameters in electronic or decentralized trading systems. Slippage is distinct from explicit fees and from price impact, though both contribute to total trading costs.

Beyond finance, the term can describe deviations between intended and actual outcomes in other contexts, such as measurement drift or process variation, though finance is the most common usage.