forex trader Ivan sits at the computer.Opens Metatrader and sees an upward trend for EURUSD.Without thinking too tight treasured button Buy at the price of 1.1515.The deal was called, but he sees Ivan?The deal was not open at the price 1.1515, and at 1.1518!
What happened?The evil machinations of a broker?The impact of transatlantic sanctions?Fed Intervention?No, nothing like that.Just your order is subjected to the phenomenon of slippage (slippage).What it is, why there is slippage and how to fight it, you will learn below.
What is the slippage?
slippage (slippage) - is the difference between the price at which you are going to make a deal, and the price at which it was actually executed.
Suppose you see an opportunity to buy at the price of 1.0607:
presses the button "buy", but it turns out that the transaction is executed at 1.0610.
difference between the price at which we bought and the price at which the transaction occurred, is 3 points.These 3 points that we lost during the
Slippage can be positive when the order is executed at a better price for you, or negative, as in the example above.
noteworthy that the stop-loss and take-profit can also slip and executed at a price somewhat different from the one you specified during installation of the order.
Pending orders can also slide, but they have small differences, but we will talk more on that below.
Now let's try to understand the concepts that many are often confused and do not fully understand.
Slippage - is the fulfillment of the order at a price different from the price you specified during installation orders.
requotes (requote) - this is when there is no price at which you send the request for the order execution.
imagine that there was a message about the new prices.You press the buy button and you have a report that there is no such price and the offer to purchase the new price.This is called re-quotes.
By setting the parameters of the slip in the trade can be avoided by re-quotes.
Slippage - is it good or bad?
I think in the course of reading many articles appeared logical question: "Slippage - is that bad?Does this mean that my broker once cunning and doing something wrong with my score? ".
The answer is simple.
presence of slip - it's good, because there is a sign of the reality of the market.This confirms that you really are trading on the interbank market.
As a rule, there is slippage in ECN type accounts.That is, the accounts that appear on the interbank market or are derived at least in part, depending on the size of your position.
If you see the slip, it is not bad and not good.This is normal.
Slippage can be on the market type accounts: ECN, NDD, STP, but it can be present in the Standart type accounts.
Availability slippage - this is a normal situation that can and should work.
Why there is slippage?
Slippage - is the result of market performance.
Market Execution - a queue of orders, requests for purchase and sale.
What happens when we place an order to buy?
Let's so-called "glass".
you are going to take a buy position.On the market there is the following sentence, 100 lots at the price of 1.3145.And at the price of 1.3146 has 50 lots.And so on:
Suppose we want to buy at the price of 1.3146.
Click on the purchase button.But since we are not alone, then this position may be a variety of applications, and these 50 items very quickly snapped up other buyers.
Thus, due to the fact that the market is a great demand for this price, there is not lot for us.But the broker is telling us that it does not matter.We have a new price of 1.3147.And we can either agree to buy the lot at the new price, or, if we score with market performance, would agree for us.
Thus, we can take a position on the less profitable for us the price of 1.3147, but it is worth remembering that if the items at this price just sell out, we will come with a price offer, 1.3148, 1.3149 and so on.
like having supply and demand indicates the presence or absence of liquidity.
Therefore, the first reason for the slip can be designated as Liquidity .
In this case, there are several options.
imagine that the size of the order is greater than the upper layer of liquidity.Perhaps the fact that there was very little liquidity, or you have been asked for some very large in terms of the warrant.
your order is divided into parts and sent to several suppliers broker liquidity.As a result, the trader receives a weighted average price, which can be worse or better prices, he pointed out.In this situation, the order slips partially.
If the liquidity provider sends execution failure, then perhaps there is a delay, and your orders to send any other liquidity provider.It took some time, and market supply in the desired price you took.As a result, the presence of other prices and the corresponding broker refuse to execute your order.
Very often during the news comes the problem of liquidity and strong order slip.
Why is this happening?Many banks and institutions that act liquidity providers, leaving the market to protect themselves from sudden price spikes and potential losses.At the same time widen the spreads, as brokers want to protect themselves from potential losses.
That is why during the exit of major news traders have problems.Spreads are big, strong and slippage make it becomes much more difficult.
Lack of liquidity is also the case when trading exotic currency pairs.For example, with the Turkish lyres, African rand, or Russian rubles.
Those who traded during strong surges of the Russian currency, have to remember a time when many brokers simply disable the ruble trade.The whole reason - the lack of liquidity.
There is one more reason for slippage - it technical problems.
These include network latency between your trading terminal and a server, aggregator and liquidity providers, as well as a banal reason - poor internet.
In this regard, I would like to tell you about the fact that especially with the large Wall Street dealers renting buildings near the center, to reach as quickly as possible to warrant trading servers, while saving naimaleyshie fraction of a second.
For us it will be quite enough to have a fast and stable internet connection.After all, we live very far from western servers.And our server sales brokers are often outside of Russia.
How to deal with slippage?
At the outset I want to say important point.Fight slippage is not necessary, but you need to work with him.
First of all start with the technical part .You need a good internet connection.Please note that wired connection is much better and more stable than the same Wi-Fi.
When starting to work in the terminal, then try to disable programs that use the network.
If you have some mega-scalper, it is most important for you.Cover a variety of programs such as torrents, vaybera, Skype, ICQ and the like.We need a good connection, or VPS-server location closer to your broker if you are trading with the help of advisers.
If you are not some mega scalper, it is sufficient to have a good and stable internet connection.
second item with slip worth noting settings in MT4 .
When you click on a window of a new order, there is a parameter - "Enable maximum deviation from quoted price»:
You can select the maximum value of slip in clauses that will be tolerated.The idea is that if the price will differ by a larger amount than the set in this parameter, the order will not be executed.
Unfortunately, in practice this does not always work.This is due to the technical features of the server and broker trading platform Metatrader 4.
You must understand that this setting does not always work the way we want it.
Similarly, setting the slippage (slippage) is configured and advisers.
third point - it Using limit pending orders.
As we know, there are several types of pending orders.It
Buy stop / Sell stop and Buy limit / Sell limit.Recall that a pending order Stop with the end in anticipation of the sample and the activation of a pending order, while the order with the end of the limit, an exhibition with the aim to enter the market on a pullback at the best price.But there is a fundamental difference in the performance of Stop and limit orders.
When placing orders, for example Sell stop, he actually only activated when the price before it will reach.
And if we expose Buy or Sell limit for the price, the order is sent in advance to the market and he has more chance of being executed exactly at that price, which we have indicated.
Thus, the type of order book the limit for us a certain part of liquidity, provided that you have an account type with output on the interbank market.
course, even such orders may slip, but the likelihood of this is much less than the market and stop orders.
fourth point - Trade high timeframes.
If you are trading on the M5 timeframe, the slippage in the 1 point for you much, but if you are trading on the daily charts, the slippage in 5 points of some great weather you do not.
Therefore, we can fight with the problem, or you can simply eliminate it and make insignificant by going to a higher timeframe.
fifth point - not trade the news.
I have repeatedly mentioned that there is a problem with liquidity, as a rule, at the output of various news.This economic data, speeches of politicians and so on.
Therefore, about half an hour before leaving the news and half an hour after its release, we try not to trade.So we eliminate the problem of liquidity.
sixth point - Change type account / broker.
course, you can replace your broker or change the type of your account, but to be honest, it is the pursuit of some impossible dream.And besides, it is usually shifting the responsibility for the loss of a loved one to a broker, execution, market makers, the fate of the villain, and so on.
So to this point should be approached with common sense and a certain degree of skepticism.Because if you start to change brokers, account types, it may take a long time and nothing else, as a rule, does not lead to good.
seventh point - Filter volatility.
Imagine that you love active trading market.Did you know that the average slippage during the news 10 points.And the average gains on transactions you - 30 points.It turns out that the slippage takes you about 30% of the profits.
Suppose you sell a part of the news, but you know that some news gives the average movement of 30 points, while others give the average movement of 60 pips.
If you take the deal to the average movement of 60 points, slippage will eat at 30% and only 17%.
Thus, using the news only with high volatility, you can reduce the damage to your bottom line.
Similarly, if you know that the average slippage in an active market, but without the news item 2.In this case, you can only trade in those days, when volatility increased in order to maximize profit and minimize losses resulting from slip.
In conclusion I would like to remind you that today we have found that the slip - a sign of the real market trade with an appropriate conclusion on the interbank market orders.
struggle with it should not be, but to start working - probably worth it.If you are trading at higher timeframes, the slip does not play a big role for you.
If you trade in small time frames, it is possible to take a number of measures in order to reduce slippage:
- good internet wired connection, turn off all consuming traffic third-party programs.
- Setting MT4
- use limit orders
- Trading on the higher timeframes
- not trade news
- Change the type of account / broker
- Filter volatility
On this I have everything.Thank you for your attention and see you soon!