Slippage and Stock Trade Execution
Slippage is the difference between a specified reference price and the actual execution price. The sign and measurement convention must be stated; not every difference means broker misconduct.
How it works
Choose a reference such as decision midpoint, order-arrival midpoint or stop trigger. Calculate buys and sells consistently. Spread crossing, price movement, market impact and routing contribute differently. Execution quality compares a series of orders against appropriate contemporaneous benchmarks.
Worked example
A buyer decides when midpoint is 100 and receives a fill at 100.12. Against that midpoint, cost is 0.12 per share, or 12 on 100 shares. If the ask at arrival was 100.10, 0.10 reflects crossing the spread and 0.02 additional movement or execution difference under this simplified example.
Amounts, prices and scenarios are fictional teaching examples. They exclude any effects not explicitly stated and are not trade recommendations.
Limits and common mistakes
A last-trade reference can be stale. A favorable average across small calm trades may conceal large losses in stressed conditions. Stops triggered during gaps do not assure fills at the trigger, and a limit can fail entirely.
Knowledge check
Can slippage be favorable?
Read the explanation
Yes. An execution can improve on the chosen reference. Measure both favorable and unfavorable differences consistently rather than discarding inconvenient observations.
References and further reading
- SEC Investor.gov: stocks, ownership and risks
- SEC: company filings and financial reports
- SEC: beginners’ guide to financial statements
These sources explain the underlying concepts and specifications. They do not endorse QBMFX Academy. Check the relevant market, protocol version and reporting rules before applying an example.