Slippage is the difference between the price you expect for a trade and the price you actually get. When you place a market order to buy at ₹100 but get filled at ₹101, you’ve experienced ₹1 of slippage. It’s a hidden trading cost that adds up significantly for active traders.
- Difference between expected and actual execution price
- Caused by volatility, low liquidity, and large orders
- Can be minimized but not eliminated
How Slippage Works
Slippage occurs when prices move during execution:
Market Order Slippage:
Your Intent:
Buy 1,000 shares at ₹500 (current price)
Order Book Reality:
500 shares available at ₹500
300 shares available at ₹501
200 shares available at ₹502
Your Execution:
500 @ ₹500 = ₹2,50,000
300 @ ₹501 = ₹1,50,300
200 @ ₹502 = ₹1,00,400
Total: ₹5,00,700
Expected: ₹5,00,000
Actual: ₹5,00,700
Slippage: ₹700 (0.14%)
Quick Reference: Slippage Factors
| Factor | Low Slippage | High Slippage |
|---|---|---|
| Liquidity | High volume stocks | Low volume stocks |
| Volatility | Calm markets | Fast-moving markets |
| Order Size | Small relative to volume | Large relative to volume |
| Order Type | Limit orders | Market orders |
| Time | Mid-session | Open/close, news events |
Example: Slippage Impact
Comparing Execution Quality:
| Scenario | Expected | Actual | Slippage | Cost |
|---|---|---|---|---|
| Liquid stock, limit order | ₹500 | ₹500 | 0% | ₹0 |
| Liquid stock, market order | ₹500 | ₹500.20 | 0.04% | ₹200 |
| Illiquid stock, market order | ₹500 | ₹503 | 0.6% | ₹3,000 |
| Fast market, market order | ₹500 | ₹505 | 1% | ₹5,000 |
On ₹5 lakh position with 100 trades/year:
- 0.04% slippage = ₹20,000 annual cost
- 0.6% slippage = ₹3,00,000 annual cost
Slippage is the gap between expected and actual trade prices. It’s caused by price movement during execution, low liquidity, or large order sizes. Use limit orders and trade liquid stocks to minimize slippage costs.
Types of Slippage
Entry Slippage
Price moves against you before entry fills. Chasing rising stocks causes entry slippage.
Exit Slippage
Can’t sell at your expected price. Common during fast declines.
Stop Loss Slippage
Stop triggers but fills below your stop price. Gap downs cause severe stop slippage.
Positive Slippage
Occasionally you get filled better than expected. Less common but happens.
Reducing Slippage
Use Limit Orders
Guarantees your price (but may not fill). Trade-off: certainty vs speed.
Trade Liquid Stocks
Tight spreads and deep books mean less slippage. Stick to high-volume names.
Avoid Volatility
Don’t trade during fast moves or news events. Wait for calm.
Size Appropriately
Your order should be small relative to typical volume. Large orders cause self-inflicted slippage.
Time Wisely
Mid-session has better liquidity than open/close.
Slippage in Different Orders
| Order Type | Price Control | Fill Certainty | Slippage Risk |
|---|---|---|---|
| Market | None | High | High |
| Limit | Complete | May not fill | Zero (if filled) |
| Stop Market | None after trigger | High | High |
| Stop Limit | Complete | May not fill | Zero (if filled) |
Common Mistakes
-
Ignoring slippage in calculations – Backtest profits evaporate with real slippage.
-
Market orders in illiquid stocks – Guaranteed terrible fills.
-
Large orders without splitting – Moving price against yourself.
-
Trading news with market orders – Maximum slippage guaranteed.
How JournalPlus Tracks Slippage
JournalPlus logs your intended price versus fill price, calculating slippage per trade and aggregating annual slippage cost—often a surprising revelation for active traders.
