What is slippage?

What is slippage?

Slippage is when the price, despite a limit or stop loss, just slips a little bit further. For example, when you put a stop loss for the AEX at 330 but the trade only closes at 331 points. In this case you could lose a little bit more than expected with the stop loss.

How slippage arisesWhat is slippage

There is a difference between the expected price of an investment and the price at which a trade is executed. Slippage especially occurs during periods with high volatility, when large orders are used and executed. In some cases slippage is inevitable. But how can one handle slippage wisely?

Guaranteed stop loss

Most brokers of the possibility to set a guaranteed stop loss. In the case of slippage, the broker will pay the extra fees. This guarantee does cost money however, in the form of a higher spread. Therefore it is recommended to use a guaranteed stop loss only in cases of high expected volatility. 

Tip: Use a guaranteed stop for the weekend and when important news is expected to be released.