{"id":869,"date":"2024-09-26T13:52:08","date_gmt":"2024-09-26T05:52:08","guid":{"rendered":"https:\/\/blog.monaxa.com\/?p=869"},"modified":"2024-09-28T00:40:46","modified_gmt":"2024-09-27T16:40:46","slug":"understanding-slippage-why-its-not-monaxas-fault","status":"publish","type":"post","link":"https:\/\/blog.monaxa.com\/en\/understanding-slippage-why-its-not-monaxas-fault\/","title":{"rendered":"Understanding Slippage: Why It’s Not Monaxa\u2019s Fault."},"content":{"rendered":"\t\t
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\n\t\t\t\t\t\t\t\t\n\t\t\t\tUnderstanding Slippage: Why It’s Not Monaxa\u2019s Fault. \n\t\t\t<\/h2 > \n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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\u00a0<\/p>

Slippage is a common occurrence in trading that often frustrates traders. However, it’s important to understand that in many cases, slippage isn’t our fault.\u00a0<\/span><\/p>

What is Slippage?<\/b><\/p>

Slippage occurs when the execution price of a trade differs from the expected price. It can happen in both directions – positive slippage (better price) or negative slippage (worse price). While negative slippage is more noticeable, both types are part of normal market operations.<\/span><\/p>

Why Slippage Occurs<\/span><\/p>

  1. Market Volatility The most common cause of slippage is market volatility. In fast-moving markets, prices can change in milliseconds. By the time your order reaches the market, the price may have moved.<\/span><\/li>
  2. Liquidity In less liquid markets or during off-hours, the spread between bid and ask prices can widen, leading to more significant slippage.<\/span><\/li>
  3. Order Types Market orders are more prone to slippage than limit orders. With market orders, you’re essentially agreeing to take the best available price at execution time.<\/span><\/li>
  4. Order Size Large orders may need to be filled at multiple price levels, potentially leading to slippage.<\/span><\/li>
  5. News Events Major news releases can cause sudden price jumps, resulting in slippage.<\/span><\/li><\/ol>

    Why It’s Not Monaxa\u2019s Fault<\/span><\/p>

    1. Even with high-speed connections, there’s always a tiny delay between when you click “trade” and when the order reaches the market.<\/span><\/li>
    2. Monaxa doesn’t control the market. We’re subject to the same price fluctuations as traders.<\/span><\/li>
    3. Monaxa is required by license and regulatory practices to execute trades at the most favorable terms for our clients.<\/span><\/li>
    4. We aggregate prices from multiple liquidity providers. The price you see might change by the time your order reaches these providers.<\/span><\/li>
    5. We may be forced to widen spreads or increase slippage tolerance to protect ourselves from losses. We try to avoid it but it is a standard industry practice.<\/span><\/li><\/ol>

      Avoiding Slippage<\/b><\/p>

      While you can’t eliminate slippage entirely, you can take steps to minimize it:<\/span><\/p>

      1. Use Limit Orders: These allow you to set a maximum (or minimum) price you’re willing to accept.<\/span><\/li>
      2. Avoid Trading During Volatile Times: If possible, steer clear of major news releases or market opens. Check the economic calendar on monaxa.com.<\/span><\/li>
      3. Consider Your Order Size: Breaking large orders into smaller ones might help.<\/span><\/li><\/ol>

        Understanding Monaxa Policies<\/b><\/p>

        It’s crucial to understand Moanxa\u2019s policies on slippage:<\/span><\/p>