CAUSES AND CONSEQUENCES OF FOREX PRICE SLIPPAGE

Forex price slippage is a common problem that does not allow many speculators to achieve the desired financial result.

It represents a discrepancy between the price of opening a new position and the value that the trader saw when sending the order. In other words, the speculator sends an order at one price, but during the time the signal arrives, the course undergoes changes, as a result of which the order is opened at a completely different price.

Such a situation may arise due to the fault of the broker, Internet provider or as a result of too high trend movement speed.

Due to slippage, the Forex trader loses part of his profit. As a rule, these are just a few points that are relevant only for short-term trading. However, when trading in large volumes, losing this part of the profit is very unpleasant. Most Forex brokers allow traders to set the maximum allowable slippage parameters in the trading terminal. In the event of a large discrepancy between the execution price and the one indicated in the quote, the order will simply not be executed.

The elimination of such a problem depends on the cause of its occurrence. There are the following ways to prevent slippage:

  1. If a trader is confident in the quality of his Internet connection and there is no fast trend in the market, the problem arises through the fault of a brokerage company. In this case, you can either choose another dealing center for cooperation or switch to another version of order execution. Slippage often appears when working with cent accounts, it can disappear when switching to standard type accounts.
  2. If the cause of slippage is a poor Internet connection, then you just need to change the provider. However, most often with a slow Internet, the order is not executed at all due to a change in the current price.
  3. When the market dominates the fast trend, the rate can change by several tens of points in just a couple of seconds. In this case, the system does not cope with the execution of the order, since all signals arrive late. To solve this problem, you can use pending orders, which will work in the event of a sharp trend movement.

The currency speculator should know that if the Forex broker indicates in the trading conditions the execution of orders using the Instant Execution system, then price slippage should not occur. This option involves the exact execution of orders or the refusal to conduct an operation. In the event of a price mismatch, the trader can decide for himself whether he is happy with his new course or not.

Leave a Reply

Your email address will not be published. Required fields are marked *

Solve : *
21 + 6 =


Releated

SURE STEPS TO BANKRUPTCY

Forex trading is often presented to the average man as a kind of investment miracle – a way of quick enrichment. And as an example, of course, big names are cited, like Warren Buffett or George Soros, who made a fortune precisely through trading in the foreign exchange market. But how many of the beginning […]