CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of Pepperstone Limited’s 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. Risk Warning.

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Slippage

Posted on: 22 July 2014 , by: Pepperstone Support , category: About Trading

Slippage is the difference in the expected price of the trade, and the price it was executed at. This can either be positive or negative slippage. The difference between prices can occur during high volatility periods, when the market is jumping from one price to the next.

Slippage can happen when there is not enough liquidity at the requested price to fill your order so the liquidity providers fill at the next best available price. We have no control over slippage as we are an ECN broker – We offer market execution and if there is no bank willing to take your trade at a certain price the trade will be taken at the next best available price. As such, Pepperstone is unable to guarantee conditional orders such as Stop Losses, Take Profits, Buy/Sell Stops, Buy/Sell Limit Orders.

For example: A client is trading AUDUSD in a 1 lot buy trade and there is an upcoming high important announcement regarding Australian Unemployment.
The trade has a take profit price of 1.02035.

At the time of the release, the result is better than expected, increasing demand for the Australian dollar. Below are the ticks that were coming through the market:

Slippage-1

As you can see from above, the bid price jumps past the 1.02035 and would therefore be filled at the next available price of 1.02109. This jump in price happens in one second and would be impossible for the trade to be closed at the requested price of 1.02035 as this price is not available in the market.

Slippage-2-1024x511

This situation can occur with all forms of requested orders such as pending orders, stop losses and take profits. We cannot guarantee stop losses as we are not a market maker that can fill orders at prices that no longer exist. We offer market execution and if your requested price is no longer available, the banks will fill the order at the going market rate.