What is Slippage?

What does Slippage mean in practice?

It appears whenever an order is filled at a worse price than the one that triggered it. Market orders in fast or thin markets are the usual cause, because the best price is gone by the time the order arrives, or the order is large enough to consume several price levels.

Slippage matters most for strategies that trade often or aim for small gains. A strategy earning a small amount per trade can look profitable before slippage and clearly unprofitable after it, which is why leaving it out of a backtest is systematically optimistic.

A worked example

Illustrative only: a rule triggers a buy at 100.00 and the order fills at 100.05. On a trade targeting 0.50, that is a tenth of the gain lost before the position has even moved.

How to read or test it

Measure it on your own orders rather than trusting a generic figure. Record the price the signal fired at and the price the order filled at, over many trades, and look at the average and at the worst cases. Compare slippage with the typical gain per trade: if it is a large fraction, the strategy is probably not viable at that size. Limit orders trade slippage for the risk of not being filled, which is its own cost.

How AKQX handles Slippage

AKQX includes estimated slippage in backtests and paper trading. It is an estimate, not a reproduction of your broker's behaviour, so real fills can still differ.

See Backtesting with fees and slippage for the feature page.

A common mistake

Backtesting with zero slippage, then being surprised that live results are worse.

Related terms