What does foreign exchange slippage mean?
After placing an order, Huiyou often found that there was some discrepancy between the point and the last traded point. During the operation, some points were “eaten”, which led to the failure to achieve the desired profit effect and even aggravated the loss. Why is this? In fact, this is what we usually call “slippage” (also called “eat some”)
What does foreign exchange slippage mean
Slippage refers to a transaction phenomenon in which the transaction point placed by a customer is different from the actual transaction point.
Many people know what slippage is, but they don’t know how slippage occurs. Some people say that the market changes greatly, so there is slippage; some people even say that it is impossible to not slippage, but this is not correct. The correct statement is that the slippage is either deliberate by the dealer or the dealer’s service cannot keep up.
Slippage is divided into normal slippage and abnormal slippage
Normal slippage is due to factors such as network transmission, price fluctuations too fast and too violent, so that customers cannot open and close positions at the specified price. In this case, the normal platform will re-quote and then give a prompt window saying that the price has been If there is a change, whether you continue to trade, this transaction will only be generated if you get your approval. On the contrary, if you disagree or do nothing, the transaction will be invalid. If you want to trade, you need to ask for a new price.
Abnormal slippage is when the price fluctuates and is stable, the customer cannot open and close positions at the specified position and enter the transaction without the customer’s permission. For example, you originally wanted to trade gold dollars at 1345, and the result plus the spread is 1347 , This has a slippage of 1.5 points without any reminder, which is equivalent to the platform earning you 1.5 points in vain. Such platforms are mostly informal platforms, so be careful.
What is the slippage in foreign exchange transactions? What is the cause?
- Network delay. Generally speaking, traders obtain quotations through their exchanges to obtain data, displayed on their own trading platform, after customers submit orders, they submit them to the exchange through the server. In this transmission process, there is often a relatively small delay, which may not be visible in normal times, but once the market fluctuates sharply and the server cannot handle it, the resulting delay will occur.
- Disruption of market quotes. Liquidity can be said to be the air of the financial market. A market that has lost liquidity must be a market without vitality. The same is true for the spot gold market. Similar to other markets, once a customer performs a selling operation, another customer must perform a buying operation, so as to ensure the normal operation of the market.
No broker can completely avoid slippage. Like spread commission, it is one of the costs of trading. Sometimes this is a price that must be paid, but not always. If possible, use limit orders to open positions, and use limit orders when exiting profitable transactions.
Some traders do not apply stop-loss orders to avoid slippage. In extreme market conditions, you may trade at a bad price, but in this case, whether you use a stop-loss market order or not, the final transaction price may be bad. Control your risks and do not trade when major risk events occur, then you can avoid major slippage.