When trading Forex, sometimes it may occur that the price a trader wants to buy or sell an asset may slightly differ from the actual value at which the order is executed. This case has a definition – slippage. It usually occurs throughout periods of high volatility.
When using market orders, which means immediate execution of trades at the best available price, slippage is a common thing. However, some Forex brokers allow traders to execute transactions at the price set initially without slippage. It can be very useful, especially during scalping, when even a slight slippage can significantly affect a trader’s overall performance. DotBig trading platform is one of such operators.
What is Slippage in Forex?
In a general sense, the term slippage in trading on financial markets refers to a situation where an order is executed at a price other than that specified in the application. In this case, the actual price may be better or worse than the one transmitted to the broker. In the first case, the trader receives additional profit. In the second, – he faces unplanned losses that reduce the profitability of the transaction.
The amount of slipping cases can range from units to several hundred pips. It depends on various factors: liquidity, current volatility, as well as the type of applications.
Why Does It Come?
Slippage can occur for several reasons:
- The use of market orders. Limit orders do not slip because there you either enter the market at a price no worse than the one you set yourself or do not enter at all.
- The low liquidity of the selected market or the large volume of your market order may lead to partial execution of the order at several prices that will be worse than expected.
- High volatility may cause the actual execution price of an order to differ from the expected one.
- Trading on the news is also associated with frequent price changes, as volatility can be high during news releases.
- Technical problems: If the trading platform, broker server, or your internet connection has technical problems, this can lead to a suspension and delay in order execution. At the moment, when it is fulfilled, the price may already differ from the one at which you planned to enter the market.
How to Minimize Slippage?
According to DotBig reviews, to avoid slipping occurrences in financial markets, traders can use specific technical tools and rules:
- Use limit orders, as they do not slip.
- Choose market assets with high liquidity.
- Keep an eye on the price of glass and evaluate the volume of your order relative to the liquidity in the glass — whether it is sufficient.
- Do not trade during periods of high volatility, such as the release of important news affecting the market.
- It is also crucial for Forex traders to choose a broker with a good reputation and reliable execution mechanisms. For example, the DotBig broker ensures the fast execution of orders.
- Monitor your Internet connection and its quality, because this will directly affect communication with the exchange’s server and the speed of sending orders from your trading terminal.
Choosing the Right Broker to Minimize Slippage
Now let’s look at the key criteria that will help traders choose a broker with minimal slipping occurrences:
- Order execution speed
Fast order execution is the first thing one should consider in trading with minimal losses from slippage. Find out how the broker copes with high loads during the news and how fast orders are executed in conditions of increased volatility.
- Liquidity
Working with liquid suppliers, like DotBig site, – is a guarantee your exchange deals will be executed at favorable prices. The larger the pool of liquidity, the less likely it is to slip, as there is always a counterparty to execute the order.
- Transparent quotations
Online brokers with transparent quotations demonstrate their reliability and ensure minimal risk of slippage. Check if the exchange offers access to the market book to see valid orders for the purchase and sale of assets.
- Reputation
The trading company’s reputation is another crucial criterion. Research the reviews of traders who have experience with a broker you want to work with. Special attention should be paid to feedback on the execution of orders during high volatility.
- Types of orders
Some trading sites offer extra tools for managing slippage, such as guaranteed execution orders at a set price or limit orders that are executed only at a stated price.
About DotBig
If you are looking for a trustworthy intermediary in the financial markets, determine your trading goals and style in the first place. While comparing online brokers, take into account the size of leverage, the speed of order execution, as well as trading modes and strategies. Some companies are focused on active trading, while others provide more advantages for passive investing.
DotBig investments is an international company that provides investors with access to online trading. Since 2003, this exchange has been offering excellent conditions for earning money not only for “pros”, but also for “beginners” in the Forex market. It offers clients a convenient toolkit for trading valuable assets.
With a transparent client policy, fair conditions, a wide range of asset offers, and advanced investment tools, DotBig Forex company provides clients with everything they need. Thus, customers of the broker can learn the specifics of exchange transactions and start making money in a fast and secure way with minimal slippage.
Trading with DotBig
It highly matters to highlight that slippage is an inevitable part of Forex trading, especially when dealing with volatile markets and low liquidity. However, with the support of the right broker, such as DotBig exchange, and while following simple rules, any trader can effectively work with slippages and they will not bring a significant negative impact on trading results.