What Is Slippage?

Slippage is a term used in trading to describe the difference between the expected price of a trade and the actual price at which it was executed. It occurs when there is an imbalance between supply and demand, or when market conditions change quickly. Slippage can be either positive or negative depending on whether the execution price was better than expected (positive slippage) or worse than expected (negative slippage).

In most cases, traders will try to minimize their exposure to slippage by using limit orders instead of market orders. Limit orders allow them to specify exactly what they are willing to pay for a security, while market orders execute trades at whatever prices are available in the current market environment. By setting limits on how much they’re willing to pay for each trade, traders can reduce their risk of experiencing large amounts of slippage due to sudden changes in market conditions.

See also  Multi-Party Computation

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