Slippage
Definition
The difference between the expected price of a trade and the actual execution price.
Explanation
Slippage occurs because markets move between when you decide to trade and when your order executes. In liquid markets, slippage is typically 1-5 basis points. In illiquid stocks or during high-volatility events, slippage can exceed 1%. Slippage is more severe for large orders (which move the market), market orders (no price protection), and orders during off-hours or news events. Algorithmic trading strategies (TWAP, VWAP) minimize slippage by breaking large orders into smaller pieces executed over time.