What is slippage in trading? Execution prices explained

Slippage is the difference between the execution price you expected and the price your trade actually received. It can be unfavorable or favorable: a buyer may pay more or less than expected, while a seller may receive less or more.

The comparison needs a defined reference price. A best ask seen before buying, a midpoint when deciding to trade, and a stop trigger are different references. Two reports can show different slippage for the same fill if they use different benchmarks.

Why the execution price can change

An order may be larger than the quantity available at the best price. To complete it immediately, the matching process may consume orders at additional, less favorable levels. That is one way limited depth affects the average fill.

The book can also change between observation and execution. Other participants trade, new orders arrive, and existing orders are canceled. A previously displayed price does not reserve liquidity for your order.

Both effects can occur together. A rapidly moving market can change the starting price, while a large order relative to available depth can move through several levels. IG's slippage definition describes the distinction between expected and executed prices, including favorable and unfavorable outcomes.

Measure a buy using a clear benchmark

Imagine a hypothetical buy for ten units. Before submission, the best ask is $100.00. The eventual fills are four units at $100.00 and six at $100.20. These are illustrative prices, not a live quote.

The volume-weighted average fill is $100.12: $1,001.20 divided by ten units. Relative to the observed $100.00 ask, the buy had $0.12 per unit of unfavorable slippage, or $1.20 across the order, before fees.

Expressed as a percentage, that is ($100.12 − $100.00) ÷ $100.00 × 100 = 0.12%. In basis points it is 12 bps, because one basis point is 0.01%.

Weight each fill by quantity. Simply averaging two execution prices is wrong when their quantities differ. If only part of the requested order fills, measure the filled part and report the unfilled quantity separately.

Reverse the direction for a sell

A higher buy price is unfavorable; a lower sell price is unfavorable. To use positive numbers for unfavorable execution, calculate:

Buy slippage (%) = (average fill − reference price) ÷ reference price × 100.

Sell slippage (%) = (reference price − average fill) ÷ reference price × 100.

If a seller expects $100.00 but receives $99.90, unfavorable slippage is 0.10%, or 10 bps. If the seller instead receives $100.10, the same formula gives −0.10%, indicating favorable execution. Always state the sign convention because platforms may present it differently.

Slippage, spread, and fees are not interchangeable

The spread is the gap between the best bid and best ask at a moment in time. A trading fee is a separate charge. Slippage measures execution against the reference you chose.

Suppose the best bid was $99.80 and the best ask $100.00, making the midpoint $99.90. A buy filled exactly at $100.00 has zero slippage against the ask, but is $0.10 per unit above the midpoint. It has crossed half of that quoted spread.

If you measure the entire difference between the fill and the midpoint, the spread-crossing effect is already inside that measurement. Adding half the spread again would double-count it. The same caution applies to price impact: when walking the book worsens the average fill, that effect is already reflected in the fill-versus-reference difference.

Fees remain separate from an execution-price comparison unless you explicitly use a fee-inclusive measure. Funding and the eventual closing trade are separate again. The all-in cost of a trade brings those components together.

Price controls trade execution certainty for a bound

A buy limit specifies a maximum acceptable execution price; a sell limit specifies a minimum. It can prevent a fill outside that bound, but some or all of the order may remain unfilled. It does not guarantee execution at the earlier reference price.

On N1's order-book markets, an immediate-or-cancel order executes what it can within its constraints and cancels the remainder. A fill-or-kill order requires the entire requested amount to execute immediately or cancels without a partial fill. See N1's order types and the market vs limit orders guide.

An interface's “slippage tolerance” also needs interpretation: check its reference price and whether it is enforced through an execution bound. Do not assume a percentage shown on one venue has identical behavior elsewhere.

Match the comparison to the market

Some N1 markets use request for quote rather than an order book. A quote is for a particular request and must satisfy its bounds and validity rules. Order-book depth calculations do not describe that matching process; compare the returned quote and actual execution using consistent size and timing.

Stop orders introduce another distinction. N1's TP/SL triggers use the index price, while the activated order still needs executable liquidity. A trigger price is not a guaranteed exit price.

For a useful execution record, keep the market, side, requested quantity, benchmark and timestamp, actual fills, average price, and fees. That lets you distinguish a depth problem from a changing market or a misleading comparison. Lower slippage on one benchmark does not, by itself, establish a lower total trading cost.