In previous articles I derided those that continuously attack their brokers as an excuse for poor trading performance. While, the majority of complaints against brokers is unfounded there are a few situations in which the brokers are hurting trade performance. As I will explain again I do not believe it is massively intentional, but rather part of the trading system. Today we are going to discuss slippage. Regardless if you believe brokers slip you intentionally or not it is important to understand that it is part of the game. By placing trades accordingly you can avoid a massive headache and control your rage when you experience slippage.

Slippage occurs when you place a trade in the forex market, but your broker cannot fulfill your quote at they price you requested. For instance if you wanted to buy the EUR/USD at an ask of 1.4567, but instead the price filled at 1.4569 you experienced a slippage of 2 pips. This is going to affect your profit by 2 pips win or lose. Now sometimes you may request an order at 1.4567 and you will get a “re-quote” this means that your order does not go through because they can’t offer you that price anymore. Generally they will offer the 1.4569 and ask if you would like to proceed. This can also be frustrating, because you can get multiple requites before you can get an order through.

Things you can do. First most software packages have things called ,”bounds” or “Ranges” This means that you can select how much slippage you are willing to accept. If you accept a range of 3 pips. This means that if you wanted to buy at an ask of 1.4500 but the quote goes to 1.4503 you will be entered into the trade at that price as you allowed them to slip you 3 pips. If you are unwilling to tolerate slippage you can set the bounds to 0 and you will get a requote and can decide to proceed.

It is important to determine how much slippage your trading strategy and personality can tolerate. If you trade the news or other fast market moving events you are going to need to accept slippage to get in and out of trades quickly. However, if you are a longer term pattern trader you may be able to tolerate waiting to get the order filled at your quote. Please note there is nothing more frustrating than being re-quoted multiple times in a fast moving market. I have tried to exit a position and received multiple re-quotes until the price had moved over 10 pips past my exit. It would be my recommendation to make sure to allow the bounds to give a range of at least 1 pip slippage on each side. How high or low you allow is up to you. Happy Trading.