Slippage
The difference between the expected price of a trade and the actual fill price — typically larger on market orders, during volatile conditions, and on illiquid contracts.
What is Slippage?
Slippage is the difference between the price you expected to fill at and the price you actually filled at. It’s a real cost of trading that doesn’t show up on the trading platform’s commission line — it shows up as worse fills than chart price suggests.
The simplest example: you click “buy market” when ES is showing 4500 on your chart. Your order fills at 4500.25 (one tick worse). That $12.50 is slippage cost. Multiply by hundreds of trades and slippage becomes a significant operational cost.
Slippage isn’t a bug — it’s an inherent property of how orders interact with order books. Market orders execute immediately at the best available price, but “best available” can change between when you click and when the order reaches the exchange (microseconds to seconds later). Limit orders avoid slippage but introduce the risk of non-fill.
How Slippage works
Sources of slippage:
1. Bid-ask spread: The minimum slippage on a market order is half the bid-ask spread. ES spread is typically 1 tick (0.25 points / $12.50). Buying market = you cross the spread paying ask; selling market = you receive bid.
2. Order book depth: If you order 100 ES at market, you may eat through multiple bid/ask levels. First few contracts fill at quoted price; later ones at progressively worse prices.
3. Latency: Time between click and exchange-receipt = window where price can move. On a fast-moving market, even 100ms delay can mean 1-2 ticks of slippage.
4. Volatility/news: During FOMC, NFP, CPI releases — bid-ask spreads widen dramatically and order book depth thins. Slippage during news can be 5-20 ticks vs. 0-1 tick normally.
5. Stop orders during gaps: Stop-market orders during gaps (overnight or news) execute at the next available price. Your 4500 stop in ES that gaps to 4485 fills at 4485 — $750 worse than expected.
Typical slippage by condition (ES, 1-contract trade):
| Condition | Typical Slippage |
|---|---|
| Normal session, market order | 0-1 ticks ($0-$12.50) |
| Normal session, limit order at touch | 0 ticks (price certainty) |
| Volatile day, market order | 1-3 ticks ($12.50-$37.50) |
| News event, market order | 3-10+ ticks ($37.50-$125+) |
| Stop-market through gap | 5-50+ ticks ($62.50-$625+) |
Slippage mitigation:
- Use limit orders for entries when price certainty matters
- Use stop-limit instead of stop-market (accept non-fill risk in exchange for price control)
- Avoid market orders right around news releases
- Reduce size during volatile periods to reduce book-depth impact
- Use better execution platforms (Rithmic typically faster than Tradovate web)
Prop firm context: Slippage costs come out of trader P&L, but they’re calculated on real fill prices. Drawdown calculations use actual fill prices — so a stop that filled with 5 ticks of slippage produces 5 ticks more drawdown than if it had filled at the stop price exactly.
Worked example
Slippage scenario — manageable:
- Trader market-buys 1 ES during normal session conditions
- Chart shows 4500.00 (last trade)
- Order reaches exchange 80ms later — best ask now 4500.25
- Fill at 4500.25
- Slippage: 1 tick ($12.50)
- Acceptable cost of execution speed
Slippage scenario — costly:
- Trader sets stop-market at 4495 (long position)
- Overnight news drives ES down. Pre-market open at 4485 (10 points lower)
- Stop-market triggers at first available tick: 4485
- Slippage: 10 ticks per contract ($500). On 5 contracts: $2,500.
- Could have been avoided with stop-limit at 4495 limit 4493 — would have been a non-fill, but trader could have managed manually instead of taking 10-tick slip.
Slippage scenario — devastating:
- Trader holds 5 ES long with no stop, into FOMC release
- Hawkish surprise drives ES down 40 points in 90 seconds
- Trader market-sells in panic — order fills across multiple levels
- Average fill price 30 points below expected level
- Slippage: 30 ticks × $50 × 5 contracts = $7,500 of slip
- Combined with drawdown of position itself, account closed
Slippage vs related concepts
Side-by-side comparison of Slippage against the most commonly confused alternatives.
| Concept | Definition | Category |
|---|---|---|
| Slippage this term | The difference between the expected price of a trade and the actual fill price — typically larger on market orders, during volatile conditions, and on illiquid contracts. | Futures Mechanics |
| Liquidity | The ease with which a futures contract can be bought or sold without significantly moving the price — measured by trading volume, open interest, and order book depth. | Futures Mechanics |
| Depth of Market | A real-time display of all resting buy and sell limit orders at every price level — the "order book" view that shows market structure and liquidity. | Futures Mechanics |
| Market Order | An order to buy or sell immediately at the best available price — guaranteeing execution but exposing the order to slippage based on order-book depth. | Futures Mechanics |
| Stop Order | A conditional order that activates when price reaches a specified trigger level — typically used for stop-losses (sell stops below long entries) or breakout entries (buy stops above resistance). | Futures Mechanics |
| Limit Order | An order to buy at or below a specified price, or sell at or above a specified price — guaranteeing your fill price but not guaranteeing execution. | Futures Mechanics |
Why traders fail Slippage
Using stop-market when stop-limit would suffice. Stop-market guarantees fill but not price. Stop-limit guarantees price but not fill. For most prop firm traders with defined risk, stop-limit is safer — being stopped out at -$200 is fine; being slipped to -$800 is account-ending.
Market-orderring through news. The 30 seconds around an FOMC release is the worst time to use market orders. Spreads widen 10x, book depth thins. If you must trade news, use limit orders or wait for the dust to settle.
Not accounting for slippage in expected returns. A backtest showing 2% per trade win expectancy might be 1% after real slippage. Backtests using mid-price fills are systematically optimistic.
Blaming the broker for slippage. Most slippage is the inherent cost of crossing the spread or interacting with order book. Brokers can affect latency (fractional difference) but can’t eliminate slippage. Better strategy beats better broker for slip reduction.
Frequently asked questions about Slippage
What causes slippage in futures trading?
Five main sources: (1) bid-ask spread, (2) order book depth (large orders eat multiple levels), (3) latency between order placement and exchange receipt, (4) volatility/news events widening spreads and thinning depth, (5) stop-market orders during gaps.
How much slippage should I expect on ES?
During normal session conditions, market orders typically fill within 0-1 tick of expected ($0-$12.50 per contract). Volatile days: 1-3 ticks. News events: 3-10+ ticks. Stops through gaps: 5-50+ ticks. Plan accordingly.
How do I avoid slippage?
Use limit orders for entries (price certainty in exchange for non-fill risk). Use stop-limit instead of stop-market for stops (accept non-fill risk for price control). Avoid market orders during news. Reduce size during volatile periods. Better execution platforms (Rithmic) help marginally.
Does slippage count toward prop firm drawdown?
Yes — drawdown calculations use actual fill prices, including any slippage. A stop that should have filled at -$200 but slipped to -$300 produces $300 of drawdown impact, not $200. Slippage management directly affects account survivability.
Why are stop-market orders so prone to slippage?
Stop-market triggers a market order when the stop price is touched. If the market is gapping through your stop level (overnight gap, news event), the market order fills at the next available price — which can be far worse than the stop price. Stop-limit avoids this by specifying a maximum acceptable fill price.