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    Slippage refers to the difference between the price at which the deal or trade takes place and the anticipated price of a trade. A slippage may happen any moment, but it is typically seen at times when the market is highly volatile and when the market orders are being used.

    A slippage can result at the time of executing a large order, but there is not enough volume at a price chosen to keep up with the present ask or bid price.

    Understanding Slippage

    Slippage is not going to refer to an adverse or favourable fluctuation as any difference between the actual price of execution, and the price of execution will be qualifying as slippage. When a particular order gets executed, the asset will be purchased or will be put on sale at the most beneficial price that will be provided by a stock exchange or other market makers.

    This has the ability to give results that are favourable, equal to or not as favourable than the anticipated price of execution. The final price of execution and the anticipated price of execution may be clubbed as no slippage, positive slippage, and negative slippage.

    Limit Orders

    Slippage is most likely to happen when there is a variation in the spread of the ask and bid. A market order can be getting executed at a lower or unfavourable price than the actual intended price when slippage happens.

    With the slippage being on the negative side, the ask will be enhanced in a long trade or the bid will be going to get reduced in a short trade. With the slippage being on the positive side, the ask will be going to get reduced in a long trade or the bid will be going to get enhanced in a short trade.

    The market participants can save themselves from the adverse effects of slippage by making use of the facility of placing limit orders which will be going to avoid market orders.

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