Forex Slippage Explained

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What is Forex slippage?

When you’re trading Forex, sometimes you’ll notice a slight difference between the price you expect and the execution price (the price when the FX trade is completed). When this happens, it’s known as slippage. It’s a common thing to experience as a Forex trader and it can work either positively or negatively.

The main reasons for slippage are Forex market volatility and execution speeds. When a market experiences high volatility it generally means there’s low liquidity and market prices fluctuate very quickly. Where this affects Forex traders is when there’s not enough FX liquidity to fill an order at the requested price. When this happens, the liquidity provider will complete the trade at the next best price.

Another cause for slippage is execution speed. This is how fast your Electronic Communication Network (ECN) can complete your trade at the price you want it to. With market prices changing in fractions of a second, having faster execution times can make a difference, especially on large trades.

Market volatility

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Why Slippage Occurs?

We insist on treating each client fairly and openly, and we adopt the common practice of dealing with slippage in the industry. JRFX will not interfere with the customer's transaction and the price at which the order is actually executed, so as to ensure that the client receives the most timely and accurate market data for execution.

In each case, we will execute orders at the better available price when the market moves in the client's favour. But under the same conditions, if the market trend is sluggish, the price will also be unfavorable.

All market data comes from large liquidity providers such as banks. In addition, in order to ensure that our clients get the most advantageous price under the market trend that is beneficial to our customers, we have invested heavily to work with reputable and powerful liquidity providers.

Examples of Forex Slippage

Say that the price of the AUD/USD was 0.9010. After analysing the market, you speculate that it’s on an upward trend and long a one standard lot trade at the now current price of AUD/USD 0.9050, expecting to execute at the same price of 0.9050.

The market follows the trend but goes past your execution price and up to 0.9060 very quickly – within a second. Because your expected price of 0.9050 is not available in the market, you’re offered the next best available price. For the sake of the example, that price is 0.9045.

In this case, you would experience positive slippage:
0.9050 – 0.9045 = 0.0005, or +5 pips.

On the other hand, let’s say your trade was executed at 0.9055. You would then experience negative slippage:
0.9050 – 0.9055 = -0.0005, or -5 pips.

It’s important to note that slippage can occur with all types of requested orders including Stop Loss, Take Profit, Buy/Sell Stops and Buy/Sell Limit Orders. As Vantage uses market execution, we cannot guarantee such orders.

We operate under Market Execution and for this reason, we are unable to fill a Forex order that no longer exists. If your requested price is no longer available, your order will be filled by our FX liquidity providers at the going market rate.

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