Understanding What Slippage Is in Trading: Complete Guide for MT5

When you place a buy or sell order in the financial markets, there is a clear expectation: to execute the trade at the price you saw on the screen. However, in practice, this doesn’t always happen. Slippage—the “gap” between the expected price and the actual execution price—is a reality that every trader using platforms like MetaTrader 5 needs to understand and manage.

What Is Slippage: Fundamental Concept

Slippage represents the difference between the price you planned to execute a trade at and the price at which it was actually executed. This variation is not a system error but a natural market phenomenon, especially during rapid movements, high volatility, or limited availability of buyers and sellers at that price level.

The most common causes include:

• Delays in transmitting and processing the order
• Sudden price movements during economic events
• Insufficient liquidity at the desired price level
• Network or trading platform congestion

In the context of MetaTrader 5, it’s important to note that when an order is triggered—whether a limit order, stop order, or market order—it converts into a market order for final execution, exposing it to possible price variations.

How Slippage Manifests in Each Type of Order

Limit Orders

A limit order allows you to set a specific price to execute your trade. The mechanism is simple: you tell the system “execute when the price reaches $90,000.” But when that price is hit and the order is triggered, MT5 processes it as a market order, subject to the actual liquidity conditions at that moment.

Practical scenario: A trader sets a buy limit order for the EURJPY pair at $90,000. When that price is touched, demand is so high that the best available market price is $90,050. Result: the order is filled at $90,050, resulting in a slippage of $50.

Stop Orders

Stop orders act as protective triggers. You set a trigger price, and when it’s reached, the order becomes an instant market order. In fast-moving markets, especially during sharp price drops, slippage can be significant because there are few sellers willing at the original prices.

Concrete situation: A trader places a sell stop order for gold (XAUUSD) at $2,600 to protect their position. A sharp decline occurs, and when the price hits $2,600, liquidity at that level is insufficient. The order executes at $2,595, with a slippage of $5. The protection worked, but at a less favorable price than expected.

Market Orders

These are the most straightforward: you click “buy” or “sell,” and the order is executed immediately at the best available price. Slippage here depends on how quickly the market moves between your click and the actual execution.

Example of dynamics: A trader sends a market buy order for the Nasdaq 100 index (NAS100) when the quoted price is 21,200. Between the click and execution, the price moves to 21,205, resulting in a slippage of $5. In volatile markets, this difference can be much larger.

Practical Strategies to Reduce Slippage

While it’s impossible to eliminate slippage entirely, there are approaches to reduce its occurrence and impact:

Choose the Right Time: Trade during periods of peak liquidity. This usually coincides with the opening hours of major exchanges—New York, London, Tokyo. With more market participants, there are more buy and sell offers, reducing extreme variations.

Avoid High-Impact News: Major economic announcements, central bank statements, or employment data cause volatile and explosive movements. During these times, slippage can spike. Plan your trades away from these events.

Adjust Position Size: Smaller orders tend to be filled more quickly and with less slippage because there is enough liquidity to absorb them. Very large trades may suffer progressive slippage as the market adjusts to the pressure of your order.

Use Dynamic Limit Orders: Instead of a pure market order, consider using a limit order slightly above (for buys) or below (for sells) the current price. This offers protection against extreme slippage, though it carries the risk of not being filled.

Slippage is an inherent reality of modern trading, but understanding its causes, how it affects different order types, and how to manage it makes you a more informed and resilient trader on MetaTrader 5.