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Ask Your Advocate: Why Does Slippage Always Work Against Me?

13 Years ago | November 21, 2013 1/28/23, 12:00 AM

 Question for the Advocate:

How come slippage will always work against you? Let’s say you enter the weekend with a EURUSD long position @ 1.3500 and a stop @ 1.3550. Israel attacks Iran over the weekend and Sunday night the first quote is 1.3620. You will have endless discussions about the price with your bank/broker as to how big the slippage is/was and at what price you will be executed (probably around 1.36 if you make a big fuss). But let’s assume you were long @ 1.3500 with a limit TP @ 1.3550, they will not grant you any slippage and say you have been filled @ 1.3550.


Your Advocate Says:

jay meisler It is not fair. You should benefit when slippage is in your favor. A level playing field would be when order execution practices treat price slippage the same for both the broker and client. In other words, the client should stand to both benefit or lose from price slippage rather than just lose from it. Unfortunately this is not a standard practice. Note: price slippage is defined as occurring when there is a difference between the price a trade is expected to be executed at and the actual price of execution.  

A broker will tell you that electronic platforms are mindless and can only execute orders when the market is trading at a specific level. Forex brokers use this feature of online trading to their advantage by executing limit orders at the price you place on the platform and executing stops at or worse than the order level. In other words, under these practices you never stand to benefit from slippage. I have seen some brokers adverrtise price improivement but it is not clear whether this has to do with market orders or positive slippage on limit orders. My guess it is the former and has more to do with internet latency (i.e. the price existing when a customor market order hits the broker's server) than a magnanimous gesture by the broker. Banks can treat stops and limit orders differently but much depends on the relationship the customer has with the bank dealing room.

Can You Ever Benefit from Slippage?

This is a good question and here are your options:

1)    If the issue arises, discuss it with your broker but odds are you will wind up talking to a low lever customer service employee and not get much ir any price adjustment

2)    If the broker is regulated, lodge a complaint with the regulator but this may be hard to prove without an audit of market rates during the time in question

3)    Contact the Global Traders Association and ask us to advocate with the broker on your behalf. As we have noted, as our numbers grow our leverage with brokers and regulators will grow. This may be a practice (i.e. symmetrical treatment of order executions) we can advocate for in the future.


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