What is a slip spread (slippage)?

A slip spread, also known as slippage, is the difference between the price a trader expects to pay or receive and the price actually paid or received, caused by changes in the market during the execution of a trade. Even when trading online, a sliding spread occurs at the moment an order is placed and received.

Where have you heard of slippage spreads?

Slip spreads are an important term in investment guides, and when buying and selling any securities will be involved. "Negative slip spreads" are a common problem in foreign currency transactions.

The information you need to know about the slip spread...

Typically, when using market orders during periods of high volatility, and when executing large orders, the expected price level is not sufficiently interest-bearing to maintain the expected price when the trade occurs, the slip spread will occur.

Orders that are prone to slip spreads include market orders (where the broker is instructed to trade at the next best price), stop-loss orders, and limit orders (where a sudden change in price makes it impossible to trade at the price specified in the order).

While slippage spreads are often seen as a negative factor, they can also be a positive factor for investors. Because the price difference between the order and the purchase of the stock may become more favorable.

Investors can reduce the risk of slipping spreads by planning trades in advance or using risk management tools such as secured stops.