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Slippage

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  #1 (permalink)
Tradersword
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Perhaps I do not understand slippage but it seems amazing to me in this computer age that we even have slippage considering how fast computers are supposed to be. In my opinion, every order should be taken at each specific price limit order entry. Perhaps the orders are still done by hand to match each buy and sell?

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 SMCJB 
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It's because computers are so fast that we have slippage. You and somebody else both send a market order to buy at X. The somebody else is faster, and wants to buy 100 lots, so not only does he buy all the X's but also all the X+1's, then your order arrives at the exchange and instead of buying Xs you get X+2's.

Maybe obvious, but to reduce slippage try and avoid low liquidity times (don't trade gasoline at midnight), high volatility times (don't trade NatGas during the EIA storage release) and at prices that everybody else is targeting (don't buy stop on a break of the 200 day high)

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 Rrrracer 
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You can also enter on limit orders which only fulfill at the specified price or better... but there is the chance of not getting filled.

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Fr33B1rd
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You can also do a marketable limit order. Basically, a limit order at the market price which puts a limit to the slippage you can experience.
Eg. Stock has ask at 10.12. You can put a buy limit order in at 10.13 so the worst fill you can get is 10.13 if, for example, 10.12 gets taken out before your order gets to the market. So it's basically a market order with a defined maximum slippage amount, if that makes sense.

Cheers,

Freebird

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Tradersword View Post
Perhaps I do not understand slippage but it seems amazing to me in this computer age that we even have slippage considering how fast computers are supposed to be. In my opinion, every order should be taken at each specific price limit order entry. Perhaps the orders are still done by hand to match each buy and sell?

Slippage is not always a result of technology but of the liquidity of the products you trade and the time of day.

Matt Z
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Tradersword View Post
Perhaps I do not understand slippage but it seems amazing to me in this computer age that we even have slippage considering how fast computers are supposed to be. In my opinion, every order should be taken at each specific price limit order entry. Perhaps the orders are still done by hand to match each buy and sell?

if slippage and commission is slowly eating up your account . trade of a higher time frame so you take less trades. if you can not trade of 240 min and 60 min. chart.... it is unlikely you can trade of 500 tick or 3 min. chart , volume foot prints and or a dome with a order book heat map.

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