Slippage

Slippage is the difference between the price you expected for a trade and the price you actually got.

How Slippage is calculated

Slippage = fill price - expected price (for a buy), often shown in basis points of the price. Sources: crossing the spread, price moving between the signal and the fill, and a large order using several levels of the book. Backtests usually model it as a fixed cost per side, such as a few basis points.

How it is read

It is larger for stop orders, in fast markets and in thin assets. It matters most for rules that trade often, because it is paid every time.

Common mistakes

• Setting it to zero in a backtest.
• Using one number for every asset and every hour.
• Forgetting that a stop fill can be far from the stop price after a gap.

What Tickfloor tested

Tickfloor's research desk has backtested 678 strategies, net of modelled trading costs. After correcting for the 761 tests run, 0 passed. That does not prove no strategy works. These are historical diagnostics, not validation under Testing Standard v2: the backtest harness predates that standard and has not been re-run to meet it.

• Momentum under realistic costs (study)

Lessons that cover it

• Costs inside a backtest
• The hidden costs: spreads, slippage and fees

• Short definition in the glossary

Related concepts

• Bid-ask spread
• Trading costs
• Market order
• Stop loss
• All concepts

General information only. It doesn't consider your objectives, finances or needs. Tickfloor holds no financial services licence and never places trades.

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