FOREX Slippage

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FOREX-Slippage

FOREX slippage is a very unpleasant thing that sometimes happen when you open a position. FOREX market is discrete, and the prices are driven by ticks. It means that the price you want to enter the market at may not exist at a certain time point (it just lies between the current and the previous price tick), and as a result your broker offers you to enter the market at a different price, which is usually worse than the one you planned. This event is commonly called FOREX slippage.

FOREX slippage often happens on bad economic news, or during the most active trading hours when FOREX sessions overlap. If you trade on news, well… just accept it, you will not avoid slippages. However if you trade using delayed orders, in most of the cases (not always) you will avoid FOREX slippages.

You should also know that a slippage may give you a better closing price, if you exit the market using a delayed take-profit order. If a gap appears on the chart at the take-profit target, your position will be closed at the new price, which may be 10 – 20 pips better than you have originally planned.

To avoid FOREX slippages, open your positions before market gets extremely active, or use delayed orders at your planned target points. If slippage occurs, and your broker offers you a worse price, you can wait a bit and when market pulls back to your price point, try to place your market order again (you may not have this opportunity though).

The decision to accept or decline a slipped price depends on how bad the new price is, and how big your planned profit is. If you expect to get a 200 pip profit, well… 10 pips slippage is not so bad. But if your target is only 20 pips, 10 pips slippage will ruin the trade.

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