slippage
Slippage is the gap between the price you expected when you placed a trade and the price you actually got.
In plain English
"I put the order in at ₦48 per share, how did I get filled at ₦49.20?" Chidinma stared at her trading app, confused. Her broker friend Tunde just laughed. "Ah, that one is slippage, my dear. Welcome to the real market."
Here is what happened. Chidinma placed an order to buy a stock on the Nigerian Exchange when it was trading at ₦48. But between the moment she clicked buy and the moment her order actually reached the market and got matched, other people were also buying, and the price moved. By the time her order got filled, the price had climbed to ₦49.20. That difference, ₦1.20 per share, is slippage.
Slippage happens because markets do not stand still and wait for you. Prices move in the seconds it takes for your order to travel from your phone to the exchange and find someone willing to sell. It happens most when a stock does not trade often, when the market is moving fast, or when you are trying to buy or sell a large quantity at once. A stock like Dangote Cement, with plenty of buyers and sellers, tends to have small slippage. A thinly traded small cap can slip badly because there simply are not enough people on the other side at your price.
It works both ways too. Sometimes slippage favours you, and you buy cheaper or sell higher than expected. Most traders only remember the times it went against them, which is human nature.
A trader in London dealing in exchange traded funds sees the same thing during volatile news moments, like when an interest rate announcement drops and prices jump before an order clears. The lesson is the same everywhere: the price you see is not always the price you get.
Bola places a market order to sell 5,000 units of a small cap stock quoted at ₦12.50. By the time the order fills, the best price available has dropped to ₦11.90 because there were not enough buyers at ₦12.50. She loses ₦3,000 to slippage on that single trade.
Questions people ask
Can I avoid slippage completely?
Not completely, but you can reduce it. Using a limit order instead of a market order means your trade only executes at your chosen price or better, though it might not execute at all if the market never reaches that price.
Does slippage only happen with stocks?
No, it shows up anywhere prices move quickly, including currency trading, cryptocurrency, and commodities. Anyone sending money home through a currency app can experience a version of it if the exchange rate shifts between the time they confirm and the time the transfer processes.
Is slippage the same as a trading fee?
No. A fee is a charge your broker takes for handling the trade. Slippage is not a charge from anyone, it is simply the natural cost of the market moving while your order is in transit.
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