Slippage
The difference between the price you expected and the price you actually got, usually because your order moved through a thin order book.
Slippage hits hardest in illiquid markets and on larger orders, where there isn't enough volume at your target price. For active flippers it can quietly cost more than fees, which is why checking the book before sizing up matters.
Slippage is the difference between the price you expected and the price you actually got. It happens when the market moves between your decision and your fill, or when your order is larger than the liquidity available at the best price and has to fill across several worse levels of the book.
On thin markets, slippage can be severe: an order big enough to clear the top of the book walks up (or down) through progressively worse prices, so your average fill is meaningfully off your target. On liquid markets with depth at every level, the same order fills close to where you expected, which is one reason liquidity is so valuable to active traders.
Slippage is a cost like the spread and fees, and it compounds with size and frequency. Managing it means trading liquid markets, breaking large orders into pieces, and using limit orders to cap the worst price you will accept, at the cost of possibly not filling the full size.
You want 500 contracts and the offer shows 100 at 60 cents, 150 at 61, and 250 at 63. A market order fills all 500 but at a blended price near 62 cents, not the 60 you saw first. That roughly 2-cent gap is slippage.
Frequently asked questions
What causes slippage?
Either the market moving between your decision and your fill, or an order larger than the liquidity at the best price, forcing it to fill across worse levels of the order book.
How do I reduce slippage?
Trade liquid markets with depth, split large orders into smaller pieces, and use limit orders to cap the worst price you will accept. The trade-off is that limits may not fill in full.
Is slippage the same as the spread?
They are related costs but distinct. The spread is the gap between bid and offer; slippage is how far your actual fill price drifts from what you expected, often because size eats through the book.