Slippage, spread, and market liquidity
Slippage is the difference between an expected reference price and the achieved execution. It depends on spread, available depth, order size, volatility, latency, and the execution method.
Liquidity has several dimensions
A narrow top-of-book spread does not guarantee enough depth for a large order. Depth can also disappear during news or rapid price moves.
Reported volume may not translate into accessible liquidity at the intended venue and size.
Plan execution explicitly
Estimate cost from the actual order book, use limit or staged execution where appropriate, and include fees and partial-fill risk.
An order split into smaller pieces can reduce immediate impact but increases timing and adverse-movement risk.
Frequently asked questions
Does a limit order eliminate slippage?⌄
It caps the execution price but may not fill, may fill partially, or may suffer adverse selection.
Why does slippage spike around news?⌄
Liquidity providers often widen quotes or withdraw depth when uncertainty and inventory risk rise.
Inspect live market data →