What is slippage?
‘Slippage’ is the term used to describe what happens when it is not possible to fill an order at the precise level that was originally specified. Slippage can occur for a variety of reasons, including:
- A significant difference between the underlying market opening level and its previous closing level. For example, a US stock may close at $50 but re-open much lower the following day at $46. A market order which had been put in to ‘sell’ at $48 cannot possibly be filled at this level and would instead be executed at $46. In this case, $2 of slippage has been applied to the original order.
- The underlying market experiences high volatility – perhaps due to news events – which causes the price to move very rapidly through your requested order level. In this instance the order may be filled at the first point that is reasonably possible, which may be less advantageous to you.
How to avoid slippage
When executing a trade with IG using current live prices, we guarantee we will never subject you to slippage i.e. we will never complete your request at a worse price than when you clicked on the deal ticket. Instead, if the market moves against you, we'll ask you to resubmit your order rather than filling it at a price you don't want.
IG clients can also use a guaranteed stop on closing orders attached to existing positions in order to avoid slippage. The order you place to exit your position is guaranteed to be filled exactly where you specify, no matter what occurs in the underlying market. Please note there is an additional charge applied for this service.
Benefits of slippage
It is worth noting that slippage can also result in orders being filled at more advantageous levels than originally specified. If the market moves in your favour, you may be eligible to be filled at a more favourable level. At IG, this ‘positive slippage’ is available to clients across all product groups when placing orders and when dealing on live prices – this is called price improvement.