Investing term
What is Slippage?
When your order fills at a worse price than you expected because the order was big enough to eat through the best levels.
Slippage is the difference between the price you expected and the worse price you actually got, usually because your order was large enough to eat through the best-priced shares and dip into worse ones. You aimed for the top quote; you filled across several levels of the order book, averaging out higher (buying) or lower (selling).
It's most severe in thinly traded securities and fast-moving markets, where there's little size at the best price and the book is sparse behind it. A market order is the usual culprit, because it takes whatever the book offers to fill completely. Using limit orders — which refuse anything worse than your set price — is the main way to cap slippage, at the cost of possibly not filling.
Slippage is filling worse than the top quote because your order sweeps through several price levels. It's worst in thin markets — using a limit order caps it.
For example
You try to buy a large block of a small stock; your order exhausts the cheap shares and fills at progressively higher prices — that gap is slippage.
Learn it by doing
That's Slippage in theory — it clicks when you use it. Practise it hands-on in a free, interactive lesson (Stage 5, How Markets Work Globally).
Try the free lesson →Why it matters to you
Slippage matters because it's a real trading cost that never shows up as a fee — it's baked into your fill price, and on illiquid securities it can dwarf commissions. It's the practical reason liquidity is worth caring about and why order type matters: a market order into a thin book invites slippage, while a limit order caps it. For anyone trading anything beyond large, liquid stocks, slippage is the hidden tax to watch.
⚠ Ignoring size relative to liquidity
Slippage scales with how big your order is compared with the liquidity available. A trade that's trivial in a giant stock can move the price sharply in a tiny one. Placing a large market order in a thinly traded security, expecting the top quote, is how investors get filled far worse than they planned. Size your orders to the book, or use limits.