Greg Michalowski Vice President of Trading at FX Direct Dealer, talks about Slippage in Foreign Exchange trading and how to minimize its impact.
Greg Michalowski Vice President of Trading at FX Direct Dealer, talks about Slippage in Foreign Exchange trading and how to minimize its impact.

Minimising the impact of Slippage

Greg Michalowski talks about Slippage in FX trading and how to minimize its impact.

First Published: e-Forex Magazine 22 / Traders Workshop / January, 2006

Slippage defined:Slippage can be defined as the difference in rates between where a market entity desires to execute a trade/order and where the trade/order is actually filled. It occurs in Stop and market orders. For example, it is 8:29 a.m. EST and the economic data release change in Non-Farm Payrolls (NFP) is to be released in one minute. The market is trading at 1.1800 – 1.1802 and stable. You have your Sell Stop at 1.1795. At 8:30 a.m. NFP is released and is much stronger than the market’s expectations (a situation where the EUR would weaken and the USD get stronger, leading to a lower EUR/USD price). In the space of the first few seconds after the initial headline, the bid on the EUR/USD drops from 1.1800 to 1.1790, to 1.1785, 1.1784, 1.1782, 1.1775 and 1.1765, before rebounding and continuing on a volatile up and down trading pattern with a downward, market bias. What happens with your Sell Stop order at 1.1795?12-13-05 FOMC Announcement One-minute ChartIn this situation, it would...continued

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