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Written by BrokerNotes.co
Edited by Jeff Anberg
Fact-checked by Steven Hatzakis, Joey Shadeck
July 26, 2024
Slippage is a common term in forex trading that refers to the difference between the expected price of a trade and the actual price at which the trade is executed. This usually happens during periods of high volatility or when large orders are placed.
In our experience, understanding slippage is crucial for managing your trading strategy effectively. Imagine aiming for a specific price only to find your trade executed at a less favorable rate – that’s slippage at work. It’s a natural part of trading but can be minimized with the right broker and strategies. This guide delves into the nitty-gritty of slippage, why it matters, and how to choose a broker that keeps it to a minimum, ensuring your trades are executed as close to your intended price as possible.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 51% and 89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Best Low Slippage Forex Brokers
Here are the best forex brokers for low slippage.
- IG- 9.9/10 Overall
- Interactive Brokers- 9.9/10 Overall
- Saxo- 9.7/10 Overall
- CMC Markets- 9.6/10 Overall
- FOREX.com- 9.4/10 Overall
- Charles Schwab- 9.3/10 Overall
- City Index- 9.3/10 Overall
- XTB- 9.1/10 Overall
- eToro- 8.8/10 Overall
What is slippage in forex trading?
Slippage occurs when an order is executed at a different price than expected. This often happens in fast-moving markets where price changes rapidly. As a trader, you might place an order at a certain price, but the market may move before the order is filled, resulting in a different execution price.
Slippage can be positive or negative, meaning you might get a better or worse price than anticipated. Understanding slippage is therefore crucial because it can impact your trading outcomes, especially in volatile markets.
Why low slippage matters in forex trading
Low slippage is vital for traders, especially those using high-frequency or scalping strategies where every pip counts. High slippage can erode profits and even turn winning trades into losses. For example, when trading during major news events, markets can move quickly, leading to higher slippage.
Having low slippage ensures that your trades are executed at prices closer to what you expect, maintaining the integrity of your trading strategy. From our perspective, if you're serious about forex trading, partnering with a broker that offers low slippage is a must to safeguard your profits and reduce unexpected losses.
Factors that influence slippage
Several factors influence slippage in forex trading. Market volatility is a primary factor; higher volatility often leads to greater slippage. Liquidity also plays a significant role—more liquid markets usually experience lower slippage. The time of day can affect slippage too, with major market sessions (like London and New York) generally offering more liquidity and less slippage.
It's also important to know that the type of order you use can impact slippage. Market orders, which are executed immediately at the best available price, are more prone to slippage compared to limit orders, which are set to execute at a specific price.
How to choose a forex broker for low slippage
Choosing the right forex broker is one of the most important variables for minimizing slippage. Look for brokers with a reputation for fast and reliable trade execution. ECN (Electronic Communication Network) and STP (Straight Through Processing) brokers often provide lower slippage due to their direct access to market liquidity.
It's also beneficial to select a broker with low latency, meaning their servers are fast and located close to major market centers. Brokers who offer VPS (Virtual Private Server) services, which allow you to run trading software on their own servers, often excel at this. Reading reviews and comparing brokers' slippage records can give you insight into their performance. Testing a broker's demo account can also help you gauge execution quality before committing real money.
Top four tips for minimizing slippage in forex trading
There are several strategies to minimize slippage in forex trading. Here are the four most important to consider:
- Use limit orders: Unlike market orders, limit orders ensure that your trade is executed at a specific price or better.
- Trade during peak hours: Higher liquidity during major market sessions (e.g., London, New York) can reduce slippage.
- Avoid high-volatility events: Steer clear of trading during major news releases or geopolitical events that can cause price spikes.
- Optimize your internet connection: A fast, stable internet connection helps ensure your orders reach the broker quickly.
BrokerNotes.co 2024 Overall Rankings
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Methodology
At BrokerNotes.co, our data-driven online broker reviews are based on our extensive testing of brokers, platforms, products, technologies, and third-party trading tools. Our product testing extends to the quality and availability of educational content, market research resources, and the accessibility and capabilities of mobile platforms and trading apps. We also dive into each broker’s trading costs, such as VIP rebates, inactivity fees, custody fees, bid/ask spreads, and other fee-based data points.
Steven Hatzakis, an industry veteran with decades of experience in the forex market, leads the BrokerNotes research team. All BrokerNotes content is researched, fact-checked, and edited by the research team.
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Note: The online brokers on our site provide the ability to trade forex in one or more ways, such as non-deliverable spot forex (i.e., rolling spot contracts), contracts for difference (CFD), or other derivatives such as futures. The availability of specific markets or features will depend on your country of residence and the broker's applicable brand or entity that services your account(s).
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We use proprietary AI technology to assist in some aspects of our content production. However, our scores, ratings, and rankings of online brokers are based on our in-depth product testing and thousands of hand-collected data points. Learn more about our AI Policy and How We Test.
Forex Risk Disclaimer
There is a very high degree of risk involved in trading securities. With respect to margin-based foreign exchange trading, off-exchange derivatives, and cryptocurrencies, there is considerable exposure to risk, including but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or related instrument. It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable, or that they will not result in losses. Learn more about foreign exchange risk.
About the Editorial Team
BrokerNotes.co provides unbiased forex broker reviews and ratings to help traders and investors find the best broker for their needs. All content is researched, fact-checked, and edited by our research team and all ratings and rankings are based on the team’s in-depth product testing.
Jeff Anberg is a Staff Editor at BrokerNotes.co and ForexBrokers.com. Along with years of experience in media distribution at a global newsroom, Jeff has a versatile knowledge base encompassing the technology and financial markets. He is a long-time active investor and engages in research on emerging markets like cryptocurrency. Jeff holds a Bachelor’s Degree in English Literature with a minor in Philosophy from San Francisco State University.
Steven Hatzakis is the Global Director of Research for BrokerNotes.co and ForexBrokers.com. Steven previously served as an Editor for Finance Magnates, where he authored over 1,000 published articles about the online finance industry. A forex industry expert and an active fintech and crypto researcher, Steven advises blockchain companies at the board level and holds a Series III license in the U.S. as a Commodity Trading Advisor (CTA).
Joey Shadeck is the Content Strategist and Research Analyst for BrokerNotes.co and ForexBrokers.com. He holds dual degrees in Finance and Marketing from Oakland University, and has been an active trader and investor for close to ten years. An industry veteran, Joey obtains and verifies data, conducts research, and analyzes and validates our content.
