Slippage in trading is the gap between the price you expect when you click buy or sell and the price your order actually fills at. In US futures, it shows up most on market orders during fast moves: a few ticks between the fill you expected and the one you got. A one-tick slip on a single contract looks trivial. The same slip repeated across dozens of trades a month quietly eats into an edge that otherwise looks solid on paper.
This lesson covers why slippage happens, where it concentrates in futures markets, how different order types handle it, and how to treat it as a cost line in your risk plan instead of an excuse after a bad fill.
What Is Slippage in Trading?
Slippage is the difference between the price you expected when you submitted an order and the price at which it actually executed. It applies to both entries and exits: a stop order that triggers during a fast drop can fill several ticks below the stop price, and a market order to enter a breakout can fill above the level you saw on the screen a moment earlier.
Slippage can run in either direction. Negative slippage means you paid more on a buy or received less on a sell than you expected, and it is the version traders notice and complain about. Positive slippage means the fill was better than expected, buying lower or selling higher than planned, and it happens just as often in fast two-sided markets, even though it rarely gets mentioned.
Why Slippage Happens in Futures Markets
Four conditions drive most slippage in futures. Volatility is the biggest one: when price is moving several ticks per second around a report or a liquidity sweep, the price you see on screen is already old by the time your order reaches the exchange. Thin liquidity is the second: if the best bid or offer only has a handful of contracts resting on it, an order larger than that gets filled through several price levels instead of one.
Order size interacts with that same thinness: a market order that is large relative to what is resting at the best price can “walk the book” through two or three price levels on its own. And the order type itself matters, because a market order asks only for immediate execution, not for a specific price, which is the one thing that makes it vulnerable to slippage in the first place.
Order Types and Where Slippage Lives
The distinction between a market order and a limit order is really a distinction about which risk you are willing to take. A market order guarantees the fill and leaves the price open; a limit order guarantees the price and leaves the fill open. Slippage is, by definition, a market-order problem: a limit order placed at a chosen price either fills at that price or better, or it does not fill at all. It cannot slip against you the way a market order can, though it can sit unfilled while the market moves away from it, which is its own form of cost.
Stop orders sit in between. A standard stop order becomes a market order the instant price touches the trigger, so it carries the same slippage risk as any other market order, concentrated at exactly the moment the market is moving fastest against the position. A stop-limit order removes that slippage risk by converting the stop into a limit order instead, at the cost of a real chance that the order does not fill at all during a sharp move, which can leave a position open with no protection.
Budgeting Slippage Into a Risk Plan
The practical fix is not trying to eliminate slippage; it is accounting for it the same way you account for the bid-ask spread and commissions, as a cost that sits on top of the stop distance you planned. If a setup is sized around a stop that is barely wide enough to survive normal noise, a few ticks of slippage on the stop fill can turn a planned 1R loss into something closer to 1.2R or 1.3R, which matters over a large sample of trades even if it looks small on any single one.
Moving a stop to breakeven after a trade reaches 1R of profit removes the planned loss on that trade, but it does not make the trade risk-free: slippage, gaps, and commissions can still turn a breakeven exit into a small loss. Building that expectation into the plan, rather than treating a breakeven stop as a guaranteed scratch, keeps the trade’s actual math closer to what the plan assumed.
Slippage Around News Events
Slippage is rarely spread evenly through the trading day. It clusters around the same windows covered in this course’s news trading lesson: high-impact releases, the open, and any sudden liquidity sweep. A stop that would fill within a tick or two on a quiet afternoon can fill many ticks away during the first minute after a surprise print, simply because the book thins out and price gaps between the levels that were resting a second earlier.
That is also why widening stops and reducing size around scheduled news is a slippage decision as much as a volatility one: a stop placed at a distance that assumes normal fills can be defeated by the fill itself, independent of whether the underlying read on the market was right.
Slippage in Backtesting and Demo Trading
Backtesting a strategy without modeling slippage and commissions is one of the most common ways a system that looks profitable on paper turns out to be flat or losing once it trades live. A backtest that assumes every fill happens exactly at the signal price is testing a version of the strategy that does not exist in a real market. The same gap shows up, in a smaller form, between demo trading and live trading, since demo orders fill instantly at the exact requested price in a way live fills during fast markets do not.
Neither of these is a reason to skip backtesting or demo trading. It is a reason to treat their results as an upper bound on performance rather than a guarantee, and to widen that gap further for any setup traded through news or thin overnight liquidity.
Frequently Asked Questions
How can you avoid slippage in trading?
You cannot eliminate it on a market order, but you can reduce its impact: use limit orders where the setup allows it, avoid placing market orders in the first seconds after high-impact news, trade contracts with deep resting liquidity, and size positions so that a few ticks of slippage do not meaningfully change the planned risk.
Is a little slippage normal, or a sign something is wrong?
A tick or two of slippage on a liquid index future during normal conditions is ordinary and not worth troubleshooting. Slippage that regularly runs several ticks or more on routine fills, outside of news windows or thin overnight hours, is worth checking against your platform’s order routing and the liquidity of the specific contract and time of day you are trading.
Does slippage only happen with market orders?
Slippage in the strict sense, filling at a worse price than expected, is specific to market orders and to stop orders once they trigger and convert into market orders. A limit order cannot slip past its limit price by definition, though it can simply fail to fill while the market moves away from it.
Is slippage always a cost?
No. Slippage can be positive as well as negative: a buy that fills below the expected price or a sell that fills above it both count as slippage, just in the trader’s favor. It gets discussed less often than negative slippage because traders notice losses more than they notice small, unplanned gains.
Key Takeaways
- Slippage is the gap between the price you expected and the price your order actually filled at; it can run against you or in your favor.
- It concentrates where volatility is high, liquidity is thin, order size is large relative to what is resting at the best price, or the order is a market order by nature.
- Limit orders cannot slip past their price but can fail to fill; market orders and triggered stop orders can fill at any available price.
- Treat slippage as a cost line in your risk plan, the same way you account for spread and commissions, rather than a surprise after the fact.
- A breakeven stop removes the planned loss on a trade, not the trade’s entire risk: slippage, gaps, and commissions can still turn it into a small loss.
- Backtests and demo fills that ignore slippage overstate real-world performance, more so around news and thin liquidity.
Risk Disclaimer
Trading futures involves substantial risk of loss and is not suitable for every investor. Past performance is not indicative of future results. This article is for educational purposes only and does not constitute financial advice. Read the full risk disclaimer.