Broker “Slippage”

Broker Slippage:

“Slippage” in the currency trading market and as it relates to periods of  economic news releases can best be illustrated by a trader wanting to buy or sell a currency pair, but, no other trader is willing to take the other side of the trade due to the unknown risk.

Even though the trader had set a BUY or SELL order, no trader was willing to enter at that price at that time. Therefore the order was not filled until a later time and at a different price.

The difference between the order price and the actual price transacted is the “slippage“.

In the currency trading market, most economic news releases are known about way ahead of time through various FOREX website economic calendars.

The economic calendars provide information as to what the news report deals with, what the report was last time and what the forecast is. It is this forecast that bothers most traders.

The experienced trader knows that some of the news releases have a strong affect on a countries economy and will change the economic outlook of the country and the value of its currency in relation to another countries
currency.

Usually from 10 to 20 minutes prior to a economic news release, most traders exit their trades in order to avoid risk – some do not.

Since the forecast is set days prior to the news release, the market has already figured it in. However, if there is a deviation in the news report from the forecast, the traders that are still in the market may be on the wrong side  of the trade and attempt to get out, and those who would get in the market will wait until the market settles and they have had a chance to evaluate the report. “Slippage” is a result.

“Slippage” at the moment of  an important economic news release, if deviation is great enough, can be huge.

Another item to consider during an economic news release, if the dealer uses a “floating” spread, that spread can be huge as well, and along with “slippage”, any possibility of profit through the use of “scalping” in the first minutes of the news release is unlikely.

Something else that figures into the equation is the possibility of a “revision” of the previous news report – however at a lesser degree, which may be made available within the next 3 to 4 minutes.

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