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Slippage

In short

Difference between expected execution price and actual fill price

You see a stock at $50 and hit buy. By the time your order fills, it's $50.08. That $0.08 is slippage — the price moved between when you decided to buy and when the order actually filled.

Slippage occurs when execution price differs from the expected price. It's caused by market impact (moving the price with a large order), latency, and thin order books. High-frequency traders exploit predictable slippage patterns.

Formula

Slippage = |Fill Price - Expected Price| ÷ Expected Price × 100

Related concepts

  • Bid-Ask Spread — The bid is what buyers will pay; the ask is what sellers want. If the bid is $99.95 and the ask is $100.05, the spread is $0.10. Every time you trade, you pay this spread as a hidden transaction cost.
  • Market Order — A market order says 'buy this stock right now at whatever price it's selling for.' You get filled immediately but might pay slightly more than you expected, especially for less liquid stocks.
  • VWAP — VWAP is the true average price traders paid throughout the day, weighted by how many shares traded at each price. Institutions use it as a benchmark — buying below VWAP is considered a good fill.
  • Liquidity — A liquid asset can be sold quickly at close to its value. Cash is perfectly liquid. A rare painting is illiquid. Stocks in big companies are very liquid. Stocks in tiny companies may have few buyers, so selling quickly requires accepting a lower price.