Slippage is one of the most misunderstood concepts in trading. Many traders automatically blame their broker when it happens, leading to the belief that “slippage is always a broker’s fault.” But is that truly accurate? This article uncovers the real causes of slippage, when it’s normal, when it’s suspicious, and what traders can do about it.

What is slippage in trading?

Slippage occurs when an order is executed at a different price than expected. This usually happens in fast-moving markets where price changes between the time a trade is requested and when it’s filled. Slippage can be positive (you get a better price) or negative (you get a worse price), although negative slippage is far more common.

For example, if you place a buy order at 1.2500 and it gets filled at 1.2505, that’s 5 pips of slippage — and potentially a costly difference depending on trade size and frequency.

Is slippage always the broker’s fault?

Not always. In fact, most slippage is caused by genuine market conditions and is outside a broker’s control — especially with brokers using ECN (Electronic Communication Network) or STP (Straight-Through Processing) models. Here’s when it isn’t the broker’s fault:

1. Market volatility:
Major economic releases, geopolitical events, or sudden news can trigger large price swings. Prices move so quickly that your order can’t be filled at the exact requested level.

2. Low liquidity:
During off-market hours or in less-traded pairs, there may not be enough volume at your requested price. The broker fills the order at the next best available price.

3. Network latency or execution delays:
Even milliseconds of delay between the trader’s order and the broker’s servers can result in price changes. This is more common if you’re trading with a slow internet connection or without a VPS.

4. Large order sizes:
If you place a large trade that exceeds available liquidity at a specific price level, your order may be split across multiple levels, resulting in slippage.

When is slippage the broker’s fault?

While slippage is often market-driven, there are cases where the broker is to blame:

1. Deliberate manipulation (price shading):
Unregulated or dishonest brokers may delay execution to create artificial slippage or manipulate quotes. These practices are more common with market makers operating a dealing desk.

2. Poor infrastructure:
If a broker doesn’t invest in fast servers or proper liquidity aggregation, you may experience excessive slippage, even in calm markets.

3. Lack of transparency:
If a broker never offers positive slippage, only negative, that’s a red flag. Genuine market conditions cause both — a one-sided pattern suggests manipulation.

4. Repeated slippage in stable conditions:
If you’re getting slipped even during low volatility or on highly liquid pairs (e.g., EUR/USD), the broker’s execution model might be flawed.

How can you protect yourself from bad slippage?

1. Choose the right broker:
Look for ECN or STP brokers with a solid reputation and real-time execution statistics. Regulation by top-tier authorities like the FCA, ASIC or CySEC adds another layer of trust.

2. Use a VPS:
Especially if you’re running automated strategies or trading high frequency, a VPS can reduce latency and improve execution speed.

3. Set slippage tolerance:
On platforms like MetaTrader 4 and 5, you can configure how much slippage you’re willing to accept. Orders outside this range will be rejected.

4. Avoid high-impact news:
If your strategy doesn’t depend on trading the news, stay out of the market during major economic releases to reduce the chance of slippage.

5. Monitor your trade logs:
Keep an eye on trade execution details. If you notice consistent slippage — especially only in one direction — raise it with your broker or consider switching.

Conclusion

The idea that “slippage is always a broker’s fault” is a myth. In reality, slippage is a normal part of trading, especially in fast or thin markets. However, consistent or excessive slippage under normal conditions may indicate a problem with your broker’s execution or integrity. Understanding the causes of slippage and how to manage it is crucial to maintaining your edge and trading with confidence.

To master trading execution and learn how to manage slippage effectively, check out our Trading Courses at Traders MBA — designed to elevate your skills and protect your trades.