Forex slippage refers to the difference between the price at which you expect your trade to execute and the actual price at which it fills. This gap occurs because forex markets move continuously, and in the brief moment between clicking your order button and your broker processing it, prices can shift.
Slippage comes in two forms: positive slippage happens when you get a better price than requested (buying cheaper or selling higher), while negative slippage means you receive a worse price (buying more expensively or selling lower). Think of it like ordering an item online at one price, but by the time checkout completes, the price has changed—sometimes in your favor, sometimes against you.
Slippage is most common during high-impact news releases, when markets gap between sessions, or when trading less liquid currency pairs with fewer available buyers and sellers. Some brokers use a practice called Last Look, which allows liquidity providers to reject trades in the final milliseconds before execution, potentially contributing to slippage in certain situations. When price movements are particularly rapid, brokers may issue a requote, presenting you with a new price that you must accept or reject before the trade can proceed.
In short: Slippage is the difference between your intended trade price and the actual execution price, which can work for or against you depending on market conditions.
Example in Action
You place a market order to buy USD/ZAR at 18.5000, expecting to enter long at that price. However, due to sudden volatility from a South African Reserve Bank announcement, your order actually fills at 18.5050—meaning you paid 5 pips more than anticipated. This is negative slippage, costing you extra on entry.
Conversely, if your order had filled at 18.4950 instead, you would have experienced positive slippage, gaining 5 pips in your favor.
Slippage risk often increases during specific trading sessions when liquidity thins or major announcements coincide with low-volume periods in the 24-hour forex cycle. Traders can reduce this risk by executing orders during session overlaps, when multiple major markets are open simultaneously and trading volume peaks.
Why It Matters
Understanding slippage in theory is one thing—grasping why it actually matters to African traders is another entirely.
Slippage wrecks risk-to-reward ratios. It pushes stop-losses beyond planned levels, turning calculated losses into bigger ones. For Nigerian scalpers or Kenyan day traders working tight margins, negative slippage eats profits fast. Backtests look great until real execution reveals slippage wasn't factored in. Suddenly strategies fail, capital shrinks, and confusion reigns.
Common Questions
Do African Brokers Compensate Traders for Negative Slippage Losses?
Most African brokers do not compensate traders for negative slippage losses, treating them as normal market risk. Compensation may occur only in cases of proven technical execution errors, typically at the broker's discretion per client agreements.
Which African Currencies Experience the Most Slippage During Trading?
Nigerian Naira, South African Rand, Kenyan Shilling, Ghanaian Cedi, and Zambian Kwacha experience the most slippage during trading due to low liquidity, political volatility, dual exchange rates, USD reserve shortages, and commodity price sensitivity affecting execution.
Does Slippage Occur More Frequently With Brokers Operating in Africa?
Slippage frequency depends more on broker model than location. African ECN/NDD brokers with global liquidity pools show low slippage comparable to international standards, while local market makers may experience higher rates due to limited liquidity infrastructure.
Can Nigerian Traders Reduce Slippage When Trading During Power Outages?
Nigerian traders can reduce slippage during power outages by using backup power systems like generators or UPS units, mobile data connections, and cloud-based platforms. However, power instability remains a persistent challenge affecting trade execution quality.
Do South African Regulations Protect Traders From Excessive Broker Slippage?
South African FSCA regulations impose transparency, audits, and sanctions that discourage broker misconduct, yet no rule directly caps slippage. Traders gain legal recourse and oversight, but must still prove excessive slippage beyond normal market conditions themselves.
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