Slippage.
In plain English
Slippage is the gap between the price an order was expected to fill at and the price it actually filled at, measured in cents per share or in basis points. It happens because the market moves between the moment you decide and the moment you execute, and because a large order can exhaust the shares available at the best price and fill the rest higher. Market orders are exposed to slippage by design, since they promise execution rather than price. Limit orders control price but accept the risk of not filling at all. Slippage is largest in thin markets, in fast markets, and around the open, the close, and news events.
01Why it matters
Slippage is a real cost that never appears as a line item, and on frequent trading in illiquid names it can exceed every commission and fee combined.
02The math, step by step
Say you send a market order for 5,000 shares when the ask shows 25.00 for 800 shares. You get 800 at 25.00, 1,500 at 25.03, and 2,700 at 25.07. The average fill is about 25.05, so slippage runs close to 0.05 a share, roughly 235 dollars on the order.
Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.
03What this is NOT
It is not the spread. The spread is the standing gap between the best bid and best ask at one moment. Slippage is what you lose beyond that, from price movement and from your order being larger than the size sitting at the top of the book.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
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