Slippage happens when a trade is executed at a price different from what was originally quoted or intended. This discrepancy can be positive, negative, or neutral — depending on the direction and size of the price movement.

Slippage usually occurs in fast-moving markets, where prices can change in milliseconds. When a trader places a market order, it is executed at the best available price. However, if the desired price is no longer available due to rapid market movement, the order may be filled at a less favorable price. This is known as negative slippage.

Conversely, positive slippage happens when the trade is executed at a better price than expected. While less common, it can occur in situations where prices move favorably just before execution.

Slippage is more likely during:

• Major news announcements

• Market openings or closings

• Low-volume trading hours

• Highly volatile assets, such as certain cryptocurrencies or penny stocks

Traders using stop orders or market orders are more exposed to slippage because these order types prioritize speed over price control. To manage slippage risk, many traders use limit orders, although this can reduce the chance of execution.