Slippage in gold trading

Slippage is the gap between the price requested and the price received. It happens because price moves in the milliseconds between the order being sent and executed, or because there is not enough volume at the requested price to fill the whole order. Slippage can be negative (worse than expected) or positive (better), though traders notice the negative kind more.

How it applies to gold trading

Gold is liquid during London and New York hours, and slippage on normal-sized retail orders is usually a few cents. It grows sharply in three situations: scheduled data releases, the Sunday open and the reopen after the daily break, and any moment of thin liquidity. A stop-loss at 3,990 filled at 3,986 during an NFP spike has $4 of slippage, which on one standard lot is $400 beyond the planned loss.

Market and stop orders are exposed to slippage; limit orders are not, because they fill at the limit or better, at the cost of possibly not filling at all. That trade-off is the core of order-type choice.

Keeping a column for slippage in the trading journal shows its real cost over a month; many traders find that a handful of news-time fills account for most of it.

A common mistake

Calculating risk per trade from the stop distance and forgetting that slippage on the stop is part of the risk. Around news, the realized loss on a 1% risk trade can be 1.5% or more.

See also: Market order, Limit order, News spike, Gap.

Frequently asked questions