Slippage occurs when your fill price is lower or higher than what you anticipated, and it might work in your favor or against you.
Slippage typically occurs when the market is volatile. This could be due to:
- Change in interest rates.
- A major reveal from a company.
- Civil unrest in a country.
Even if you have a stop loss or take profit in place, it will eventually impact all of your trades. Two categories of slippage exist:
- Gap Slippage.
- Partial Slippage.
Gap Slippage: The price fluctuates when you try to purchase or sell your lots, and the order is modified to reflect the current market price.
Partial Slippage: When the liquidity is ticket in the market.
Due to market liquidity, there may not be enough demand to buy all of your lots at the price you would like to sell them for, and a dual set of lots in your order may go to the next lot price, causing your average take profit to be higher or lower than you had anticipated.
Because of this, it’s critical to monitor the market and make an effort to anticipate future developments.
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