What Is Slippage in Trading? (Basics)

What is slippage in trading, and why did your order fill at a price you never saw on the screen? In the last lesson, What Is Brokerage in Trading?, you learned about the charges that are written on your contract note. Slippage is different. It never appears as a line item, yet it can cost you just as much, and beginners usually discover it the hard way.

Table of Contents

1. What Is Slippage in Trading?
2. Positive and Negative Slippage
3. A Worked Example With Market Depth
4. Why Slippage Happens
5. Slippage on Stop Loss Orders
6. How to Reduce Slippage
7. Common Beginner Mistakes
8. Key Points to Remember
9. Frequently Asked Questions

1. What Is Slippage in Trading?

Slippage is the difference between the price you expected when you placed an order and the price at which the order was actually executed.

Imagine you see a stock at ₹250.00 and click Buy. By the time the order reaches the exchange and is matched, you are filled at ₹250.05. That ₹0.05 gap is slippage.

It happens because prices on the exchange change every second, and because the price on your screen is not a promise. In What Are Bid and Ask Price? you learned that you buy at the ask and sell at the bid. Slippage is what happens when the ask or bid moves, or runs out, before your order is done.

2. Positive and Negative Slippage

Slippage can work in either direction.

• Negative slippage: you get a worse price than expected. You buy higher or sell lower than you planned. This is the one traders worry about.
• Positive slippage: you get a better price than expected. You buy lower or sell higher than you planned. It happens, but you cannot count on it.

Slippage is not an error and it is not your broker cheating you. It is a normal part of how a live market works. The goal is not to remove it completely, which is impossible, but to keep it small. You can read a general definition in Investopedia’s explanation of slippage.

3. A Worked Example With Market Depth

Let us reuse the market depth from our bid and ask lesson. These are the sellers (asks) waiting in the order book:

Ask price	Shares available
₹250.00	800
₹250.05	1,500
₹250.10	3,000

You place a market buy order for 3,000 shares. A market order takes whatever is available, starting from the best price:

Level	Shares filled	Cost
₹250.00	800	₹2,00,000
₹250.05	1,500	₹3,75,075
₹250.10	700	₹1,75,070
Total	3,000	₹7,50,145

Your average price is ₹7,50,145 ÷ 3,000 = ₹250.0483, not the ₹250.00 you saw.

• Expected cost at ₹250.00: ₹7,50,000
• Actual cost: ₹7,50,145
• Slippage cost: ₹145

The example uses sample numbers to show the mechanism. In a real market, other orders may arrive while yours is being filled, and the exact result will differ. The lesson is that the bigger your order compared with the shares available at the best price, the more slippage you can expect.

Pro Tip: Before placing a large order, open the market depth and count how many shares are available at the first few price levels. If your order is bigger than the first level, expect your average price to move.

4. Why Slippage Happens

Four situations cause most slippage:

1. Fast-moving markets. When prices are changing quickly, the price can move between the moment you click and the moment you are filled. The first minutes after the market opens at 9:15 am and the minutes around important news are typical examples.
2. Thin trading (low liquidity). When few shares are on offer, there is little available at each price, so your order quickly reaches worse prices. A wide bid-ask spread is a warning sign.
3. Large orders. As our example showed, an order bigger than the quantity at the best price has to use the next price levels.
4. News and gaps. When important news arrives, such as results or a major announcement, a stock can open far from the previous close. There may be no trades at all in between, so orders fill at the first available price.

You can see the size of recent trading and live prices for any stock on the NSE India website or in your broker’s app.

5. Slippage on Stop Loss Orders

Slippage matters most when you are exiting. A stop loss is meant to limit your loss, and you learned about stop orders in Order Types in Trading. But a stop loss is only a trigger. When the trigger price is hit, a market-type stop loss sends a market order, and that order fills at whatever is available.

Example:

• You buy 100 shares at ₹250 and set a stop loss trigger at ₹245.
• Bad news arrives overnight, and the stock opens the next morning at ₹238.
• Your stop loss triggers, but there were no trades at ₹245. It fills near ₹238.

Planned loss: (250 − 245) × 100 = ₹500 Actual loss: (250 − 238) × 100 = ₹1,200 Slippage: ₹7 × 100 = ₹700 extra loss

A stop loss-limit order does not give you this surprise on price, but it has a different risk: if the price jumps past your limit, the order may not get filled at all and the position stays open. Neither type guarantees your exit price. This is one more reason risk management, which we will cover in its own category, starts with how much you can afford to lose on a trade, not with a single price.

6. How to Reduce Slippage

You cannot remove slippage, but you can keep it under control:

1. Use limit orders when the price matters. A limit order never fills at a worse price than the one you set. The trade-off is that it may not fill.
2. Trade liquid stocks. Heavily traded shares have tight spreads and lots of shares at each price level.
3. Avoid market orders in the first minutes after the open and around major news. Prices move fastest then.
4. Split large orders into smaller parts so you do not exhaust the best price levels at once.
5. Check market depth before you click, as in our example.
6. Include a small slippage allowance in your plan. When you work out your break-even, which you saw in the brokerage lesson, add a little room for slippage too.

If you trade within the day, as explained in What Is Intraday Trading?, slippage matters even more because your profit targets are small, and a few paise on each side add up quickly.

7. Common Beginner Mistakes

1. Believing the screen price is the fill price. The price shown is a snapshot, not a guarantee.
2. Using market orders on thin stocks. The spread and the thin order book combine to give large slippage.
3. Placing big orders without checking depth. Your own order moves the price.
4. Trading right at the open or during news. Fast markets mean wider slippage.
5. Expecting a stop loss to exit at exactly the trigger price. It may not, especially after a gap.

8. Key Points to Remember

• Slippage is the gap between the expected price and the actual fill price.
• It can be negative (worse price) or positive (better price).
• It is more likely in fast markets, thin stocks, large orders and news gaps.
• Stop loss orders can suffer slippage, sometimes a lot.
• Limit orders, liquid stocks and smaller order sizes help keep slippage down.
• Always add a little room for it in your plan.

9. Frequently Asked Questions

What to Learn Next

You now know the costs hidden in the price you pay. The next question is about the money you pay it with. Many beginners are surprised to learn they can take a position larger than the cash they hold. In the next lesson, we explain margin: what it is, how it works and why it deserves respect.

Read “What Is Margin in Trading?” to understand how your broker lets you trade with more than your own cash.

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This article is for educational purposes only and does not constitute investment or trading advice. Examples use sample numbers to explain how slippage works. Trading in the stock market involves risk, and you can lose money. Please read our full Disclaimer before making any trading decisions.