Slippage - Financial definition
Financial acronyms
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Concise definition of the term slippage
On a market price order, slippage describes the difference between the expected and the actual execution price.
Comprehensive definition of the term slippage
Slippage occurs mainly for two reasons:
- It may be due to a highly volatile market environment. When prices vary in rapid succession, it is likely that the price displayed at the moment the order is entered will not be the price at which it will be executed when executed on the market.
- Alternatively, it may result from the fact that the order to be executed is of large size or that, at that moment, liquidity on the security is scarce. In both cases, the order may be executed against not one but several opposite orders present in the order book, resulting in the average execution price being less favorable than the price of the top of the book order.