Slippage in Trading: Price differences between expected and executed trades due to market volatility and liquidity issues.
Understanding Slippage in Trading Slippage is a common occurrence in financial markets that affects traders across various asset classes, including stocks, forex, and cryptocurrencies. It refers to the difference between the expected price of a trade and the actual price at which it is executed. This discrepancy arises due to market volatility, liquidity conditions, and order execution speed. When traders place market orders, they expect their trades to be executed at the prevailing bid or ask price. However, if the market moves quickly or there isn’t enough liquidity to fill the order at the expected price, slippage occurs. This can result in either a favorable or unfavorable price adjustment, depending on market conditions. While slippage is often seen as a negative aspect of trading, it is an inherent part of financial markets and can sometimes work in a trader’s favor. For example, if a trader places a market order to buy a stock at $100 but the order is executed at $100.5...