Slippage
Slippage is the gap between the price on screen when an order is placed and the price at which it actually fills. It appears whenever an order is large relative to available depth, or the quote moves during the milliseconds or minutes between decision and execution.
Along with the spread, it forms the true cost of trading that no commission schedule mentions.
The math
An investor sees a stock offered at $40.00 and sends a market order for 1,500 shares, expecting to pay $60,000. The visible size absorbs part of the order, the rest walks up the book, and the average fill lands at $40.12.
The $180 difference, 0.3%, is slippage.
| Expected | Actual fill | |
|---|---|---|
| Price per share | $40.00 | $40.12 |
| Cost of 1,500 shares | $60,000 | $60,180 |
Repeat that on entry and exit across a 20-position portfolio turned over every few years and the leak reaches thousands of dollars, all invisible on any statement because each fill simply looks like the price that day.
The trap
Slippage concentrates exactly where investors are least careful: market orders in the first minutes after the open, trades placed during news, and orders in small caps sized without checking depth. It also scales with urgency, so the investor who must have the position today pays the most for it.
Backtests and screen prices assume zero slippage, which is one reason paper strategies outperform their live versions.
The move
The buy-and-hold investor has a structural edge here: almost no trade is genuinely urgent. The working habits are to use limit orders as the default, avoid the open’s first fifteen minutes when spreads are widest, and break large orders in thin names into pieces spread over days.
A useful audit takes five minutes a year: compare actual fills against the quote at order time across recent trades. If the average gap exceeds a tenth of a percent in liquid names, execution habits, not stock selection, are the first thing to fix.