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Not every novice trader knows that his deals do not always open at the price he originally intended. On this score, there are many disputes and opinions: some say that this broker is deceiving, others blame the trading platform or the market maker. In fact, this phenomenon is called slippage and is quite legitimate and normal practice in any market. Regardless of where you trade in Forex, binary options or you have a large capital, which is enough to work on the stock exchange, every investor and trader faces a price mismatch when opening a position.

The phenomenon of slippage in Forex and binary options. General theory

Slippage (with English. Slippage) is a case when the transaction is opened at a price worse or better than it was declared on the broker's orders. The differences sometimes reach several points, resulting in significant losses or small profits. For example, you would like to sell EURUSD at the current price of 1.0600, but in the end, sold by 1.0557 and are now forced to outstay losses or move stop-loss.

There are a variety of circumstantial reasons for the slippage occurs:

• important news;
• breakdown of highs and lows for several years;
• price gap (gap);
• a major player action (market maker) for bulk purchase or sale;
• technical problems in communication with the broker.

A deeper understanding of the essence of this phenomenon in practice is very simple, just have at least a glimpse of the exchange tape and glass. Unfortunately, many traders in forex and options glass unfamiliar quotes, since it is not available in the currency market. For general guidance I have prepared for you a small example of the Chicago Stock Exchange (CME), the look of all applications for EURUSD in the futures market in glass prices.

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Blue highlighted buyers and sellers in red. At each price there is a certain number of applications and want to make a deal. Slippage occurs when you decide to buy or sell at a specific quotation and counter orders for it anymore. As a result, the broker offers you to buy at the cost of another.

There is also a similar situation to slip, but differs in that the broker asks you for confirmation of position opening at a new price. This occurs because of the desired quote is no longer any applications. This phenomenon is called "re-quotes» (Requote).

Slippage for the trader - is a sign of the reality of the market in which it trades. All offers on desired price only fake brokers who do not take your trades in the market. We should not confuse the slip with the spread, which is the difference between the price of purchase and sale Bid Ask at any given time.

There are several ways to deal with the change of the opening prices of the transaction on the Forex and binary options:

1. The first step is to provide high-quality Internet connection, which will allow to have a stable relationship with the broker's backend. If there is a problem of domestic Internet goes by the wayside, for the transmission of 3G signal - it is quite often the case (for example, when trading with a mobile device). Try to open transactions in the field with good network signal and a high data rate.

2. Do not trade in the points too high volatility in the market and release of important news, and watch historical highs and lows in the financial instrument.

3. Use the limit orders (Buy / Sell Limit). A good way to open the transaction on the appropriate price is the use of exclusively limit pending orders, which mean entrance into the position at the best price. It is important to distinguish them from the stop orders are executed at the market price slip.

4. Set the maximum price deviation in the terminal settings. This option is available when opening transaction Metatrader. Option located at the bottom of the window with the new order. In the case of binary options trading platform through a broker such a configuration is not present, but there may be analogs.

The danger of slippage on short-term options, because of what they may experience

For some trading strategies slippage is unacceptable, so you need to look for a situation where this factor is completely eliminated. A clear example of this strategy is for turbo-scalping options when transactions are opened only for a few seconds.
Danger of slippage on short options (from 30 5 minutes to seconds) is shown in several factors:

• significantly reduced the likelihood of a profitable trade, which may also affect the long-term results;

• there is a trade in "blind" because there is no system input to a position and the price far beyond the technical figures or models;

• increases the emotional stress from trading, increasing the influence of psychological factors (high risk of loss of deposit).

Profit scalper transactions is achieved due to changes in the price of the minimum number of points. As a result, when you open a position accuracy is critical in the performance without any deviation of the price. Otherwise, almost all of your transactions will be unprofitable.

Causes from slipping on binary options are the same as on the Forex - high volatility and a bad relationship with the broker. Therefore, you should definitely take into account the above instructions about the Internet connection and the news.

A novice trader and an amateur at all can doubt the efficiency of the chosen strategy. Even not every professional will be able to keep the faith in your trading strategy in the presence of 10 consecutive losing trades, but he will know what the reason is slippage.

Also worth noting is the important fact that most brokers offering the opportunity to trade binary options with little time expiration (expiration date), have spread, which were mentioned earlier. In contrast to Forex, this factor is extremely positive effect on Scalping strategy and significantly reduces the impact of slippage on the trade results.

Now is the time of practical examples to become clear theory.

During my practice in trading binary options, I met with slip many, many times. Some of them brought me losses. Each such event I recorded, analyzed, stored in my database. It is on the basis of this basis that I develop a detailed strategy for trading on the news of the economic calendar.

Example № 1:

January 10 2017 years 00: 30 GMT news outlet for retailers in Australia. News with three bulls, has a strong impact on the market. In short, a great opportunity to earn!

slippage in Forex

The decrease was expected, the actual value was even lower than expected. The data came in red, which signaled the opening of the option to reduce AUD / USD. Most traders, including me, trade short-term options for news (120-300 seconds). So, the pair AUD / USD quickly began to fall and within 14-44 seconds after the publication of the data reached a minimum. As can be seen on the screenshots below, a significant slip occurred in the first 4 seconds. After reaching the minimum point, the pair began to recover and grow. Hence the conclusion: if the trader managed to open the option in the first 4 seconds - it was profitable, the options opened in the period of 5-60 seconds with the expiration of 60-300 seconds - had a loss.

slippage in Forex

Such slippage occur not all economic news. But I have some already in the database are labeled "frequent slippage risk."

On many platforms at the opening of the transaction is necessary to confirm your decision. At the same time, you can cancel the opening and transactions. Therefore, if you see that the rate is falling rapidly and there is a risk of catching a disadvantageous entry point, it is better to cancel a deal.

slippage in Forex

The optimal option trading on the news was the option for a fall to 30-60 minutes.

slippage in Forex

Example № 2:

The following example is a dynamic reaction of the currency market with a slip - a measure of index of business activity in the non-manufacturing sector (PMI) from the US ISM. The indicator is very important for the national economy. If he is on 57-58 level (and sometimes even 67-70) - then the country's economy is developing very well. 50 neutral value is not bad, but not good. But the figure in the region of 40 evidence of the crisis.

5-2017 April at 14: 00 GMT were published data on the US.

slippage in Forex

As you can see, they came in red, figures are even lower than experts expected. The market's reaction was immediate. Currency pair USD / JPY in the first seconds began to fall. Traders around the world have become massively open options for sale. And again, most likely short-term deal to 2,3, 5 minutes.

In the screenshot below you can see the downward slide in the first second. Motion graphics can be analyzed: if the option was open during 01-12 seconds, the trader made a profit on short-term options. If, later, the first 12 seconds, the trader suffered losses.

slippage in Forex

The optimal option trading on the news was the option for a fall to 15 minutes.

slippage in Forex

Example № 3:

The following example is slightly less dynamic, but it is also inherent in the phenomenon of slippage.

7-2017 April of the year - change of employment in Canada, the news with three bulls.

slippage in Forex

As you can see on the screenshot, experts expect a significant decline, and turned to the contrary, we saw green, symbolizing a significant increase. The Canadian dollar quickly began to strengthen, and then a pair USD / CAD had to take a fall for the next 2, 3, 5 or minutes. A significant decline was rapid in the first 10 seconds, when it was possible to observe the slip.

slippage in Forex

Conclusion:

As you can see, not always our transaction can be opened at the price at which we pressed the button to buy or sell. The price can be offered to the other, and all this because of the rapid variability of the market, due to the slippage.

This phenomenon can be detrimental to our option and can bring loss. I hope that their advice and examples I have helped you to understand this concept, and now you will always pay attention to the price of the asset at the opening price of the option and the confirmation of the opening of this option. If the difference is large, it is better cancel!

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