Just saw someone ask about what forex slippage is in the group, and the real thing is something you should understand well if you want to trade because it directly affects our profits.

Simply put, forex slippage is the difference between the price we expect and the actual price at which we trade. It occurs because the forex market changes very rapidly every minute; prices can move in just fractions of a second.

There are three types of slippage you need to know. The first is no slippage at all, where the price we trade matches our expectation. The second is positive slippage, where we get a better price than expected (an advantage). The third is negative slippage, where the price is worse than expected (a loss).

For example, you want to buy at 1.3650, but the price changes to 1.3660 before the order is filled. That’s negative slippage of 10 pips, which is bad for us. But if the price changes to 1.3640, that’s positive slippage, giving us an advantage instead.

The important thing to understand is that slippage is a normal phenomenon in the market. It’s not necessarily bad. If there were no slippage at all, it would mean there’s no liquidity and no opportunity for speculation. Most traders fear this — not slippage itself, but excessive slippage.

ECN accounts that access the interbank level will always experience slippage. It’s a sign that we’re trading in a real market, not a fake one.

So, how can we reduce slippage? First, choose a good broker with clear regulation. If slippage exceeds 10% of our trade or is often higher than other brokers, it’s time to switch.

Second, take care of your internet connection. Use a wired connection instead of wireless. Close other programs that use the internet while trading. If you’re scalping, pay more attention to this.

Third, set the maximum slippage in your trading terminal. If the price deviates beyond that limit, the order will not be executed.

Fourth, use pending limit orders instead of market orders. Sometimes, limit orders are more likely to be cut out from the requested price than stop orders, but they can help reduce slippage.

Fifth, switch to a higher timeframe. Traders using 1-minute charts will experience more slippage than those trading daily charts.

Sixth, avoid trading around major news events. Before the news releases, about 30-40 minutes prior, or during the news, the likelihood of slippage increases many times. It’s better to wait for the market to calm down for half an hour.

Seventh, if you must trade during news, choose highly volatile news. For example, some news can move the market by 50 pips, while others only 25 pips. If our average profit is 45 pips and the average slippage is 15 pips, then slippage will eat up 30% of our profit. If we only trade news that moves a lot, slippage will only consume 17%.

Regarding currency pairs like EUR/USD and USD/JPY, they have higher liquidity, so slippage tends to be lower. But during high volatility, even good pairs can experience slippage.

In summary, no one can completely avoid forex slippage. It’s a risk that traders must accept. But we can minimize it as much as possible through good planning, choosing a reliable broker, managing internet quality, and avoiding trading during highly volatile times.