Spreads, commissions, and overnight interest are all on the table, but slippage is often "invisible": you thought the transaction was completed at 2350, but the actual transaction was at 2350.5, and this 0.5 is the slippage. It’s not much once, but it adds up to a lot. This article explains the causes of slippage, the difference between normal and abnormal, and how to evaluate and reduce slippage.

What is slippage

Slippage refers to the deviation between the actual transaction price and the expected price (or the price seen when placing the order). There are two directions: negative slippage, the transaction price is different from the expected price, and the cost increases; positive slippage, the transaction price is better than the expected price, which is equivalent to an unexpected gain. Most of the time traders perceive negative slippage, but positive slippage also exists. Slippage itself is a normal phenomenon in the market. The question is whether it is frequent and whether it is abnormal.

Where does slippage come from?

The first is insufficient liquidity: if the order volume exceeds the current market capacity, or the market is too thin, prices will slide. Second, the market situation is violent: the moment non-agricultural, CPI and other data are released, prices jump rapidly, and there is a natural gap between the transaction price and the price seen. The third is execution mode and speed: order delivery path, server speed, and platform matching method will all affect the probability and magnitude of slippage.

Normal slippage and abnormal slippage

Normal slippage occurs in reasonable scenarios with violent market conditions and insufficient liquidity. The amplitude matches the market conditions, and it is difficult for any platform to completely avoid it. Abnormal slippage is something to be wary of: usually the slippage is very small, but when the market fluctuates, large slippage occurs frequently; or at the same time, other platforms have normal slippage, but a certain platform continues to deviate - these may point to problems with execution quality or the quotation mechanism. The method to distinguish the two is horizontal comparison: compare the transaction price deviations of different platforms during the same time period and the same product.

How to reduce the impact of slippage

The first is to avoid periods of high slippage: the moment when data is released, the opening and closing of trading, and periods of low liquidity. Avoid it if you can. The second is to use limit orders more often: limit orders specify an acceptable transaction price, and the transaction will not be completed if it exceeds it, naturally avoiding adverse slippage; market orders must be executed, making it easier to suffer slippage. The third is to evaluate the execution quality of the platform: use simulated trading or small-amount real trading to record the deviation between the actual transaction price and the expected price under normal market conditions and violent market conditions to form your own "slippage portrait." The fourth is to include slippage in costs: reserve room for slippage when making cost estimates, and do not overestimate expected profits. The fifth is to review the slippage record: write the slippage in the trading log, regularly check the time period and market situation where you mainly suffer slippage, and avoid it in a targeted manner.

Incorporate slippage into your assessment

Bringing the dimension of slippage to the platform, WMAX provides conditions for evaluation and response: its execution mode and order policy are publicly disclosed, and traders can understand the platform's matching and delivery methods; it supports preset order types such as limit orders, which facilitates locking in acceptable transaction prices before important data; simulated accounts are suitable for recording actual slippage conditions under different market conditions to form a reference before entering the real offer. It should be noted that slippage is affected by the market environment, and no platform can promise to be completely free of slippage. The focus of traders is to identify abnormalities and control scenarios. Whether WMAX is right for you depends on your specific requirements for execution quality and slippage management.

write at the end

Slippage is the most hidden part of precious metals transaction costs: it is not large per time, but the accumulation is considerable, but it is often ignored. Understand its causes, distinguish normal from abnormal, use limit orders and period management to reduce the impact, and include it in cost calculations. Slippage will no longer be an "accident", but a variable that can be managed. Regardless of whether you choose WMAX or other platforms, it is recommended to record first, then evaluate, and then make a final offer, and always control risks within a tolerable range. Leveraged trading carries high risks. Please fully understand the relevant rules before entering the market and make prudent decisions.