Slippage, requotes and negative balance protection

The price you click is a quote, not a promise. Between the click and the fill the quote can move, disappear or be withdrawn. This lesson covers the three ways that happens and the one protection that stops it from becoming a debt.

Slippage

Slippage is the difference between the price you asked for and the price you got. It happens with market orders and with stop orders, and it happens in both directions.

In normal London-session conditions, slippage on a major is a fraction of a pip and roughly symmetrical: sometimes for you, sometimes against. Around news, at rollover and on the Sunday open it is large and almost always against you, because the direction of the move is the reason your stop triggered.

A broker whose slippage is always negative and never positive in calm conditions is either filling from a stale quote or applying an asymmetric rule. Either is a reason to leave. Many regulated brokers publish their slippage statistics; look for a distribution with both signs.

Two practical adjustments:

1. Budget for it. Add 1 to 2 pips of expected slippage to the stop distance when sizing a trade on a major, and considerably more if the trade will be open through a red-calendar event.
2. Use limit orders for entries where the strategy allows. A limit fills at your price or better, or not at all; it cannot slip against you. The cost is that it may not fill.

Requotes and "last look"

A requote happens on platforms that use "instant execution": you click at a price, the broker's dealing desk finds the price has moved, and instead of filling you it sends back a new price and asks you to accept or decline. In fast markets you can be requoted several times in a row and never get filled, which is its own kind of slippage.

Under "market execution" there are no requotes; the order fills at the next available price, with whatever slippage that implies. Most STP and commission accounts use market execution. If a broker's standard account uses instant execution, that is a signal that a dealing desk is in the loop.

Last look is the wholesale version. Some LPs reserve the right to hold an order for a few milliseconds and reject it if the price has moved against them. Retail traders do not see this directly, but it is part of why fills slip more in fast markets: several layers up, someone declined to honour the quote.

Order types that matter

• Market: fill now, at whatever is available. Slippage possible.
• Limit: fill at this price or better. No negative slippage; may not fill.
• Stop: becomes a market order when price reaches the level. Slippage possible, sometimes large.
• Stop-limit: becomes a limit order at the level; protects against slippage but may leave you in the trade when you most wanted out. Rarely appropriate for a protective stop.
• Guaranteed stop: offered by some brokers for a premium (a wider spread or a fee). Fills exactly at the level regardless of gaps. Worth considering for positions held over a weekend or a known event.

Key idea: A stop is an instruction to get out at the next available price, not a guarantee of the price on the ticket. In quiet markets the two are the same; in the moments that matter, they are not. Size for the gap you can imagine, not the stop you can see.

Negative balance protection

If a gap or a news spike moves price past your stop by enough, your equity can go below zero before the broker closes the position. Without protection, you owe the broker the difference.

The best-known example is 15 January 2015, when the Swiss National Bank abandoned the 1.20 floor it had been defending in EUR/CHF. The pair fell roughly 30% within minutes with almost no tradeable prices in between. Traders short CHF (long EUR/CHF) with stops a few dozen pips away were filled thousands of pips lower. Retail clients at several brokers ended up owing far more than their deposits; at least one large UK broker became insolvent and another required a rescue.

Since then:

• UK (FCA), EU (ESMA rules), Australia (ASIC): negative balance protection is mandatory for retail clients. Your loss is capped at the money in the account, per account.
• United States (CFTC/NFA): not required by regulation. Some brokers offer it voluntarily; check the terms.
• Offshore: usually not offered. The customer agreement will typically say you are liable for any deficit.

Protection per account means exactly that: if one account goes negative, the broker cannot come after your other accounts or your assets. It does not mean the broker will close you before zero; it means they eat the difference if they do not.

The practical rule: if you hold positions over weekends or through major events, be at a broker that offers negative balance protection, and know that even then, "you cannot owe more than the account" is a floor on the disaster, not a reason to be in the disaster.

Try it: Find the exact clause in your broker's client agreement that covers negative balances. Copy the sentence into your journal. Then find the clause on order execution that says whether they use instant or market execution and whether slippage is applied symmetrically. If either clause is missing or vague, that is a finding.

Recap

• Slippage is the gap between the quoted and filled price; small and symmetrical in normal conditions, large and against you around news, rollover and the Sunday open.
• Requotes come from instant-execution dealing desks; market execution fills at the next available price instead.
• Limit orders cannot slip against you but may not fill; stops can slip; guaranteed stops cost extra and remove gap risk.
• Negative balance protection caps your loss at the account balance; mandatory in the UK, EU and Australia, optional in the US, rare offshore.
• The 2015 EUR/CHF collapse is the reference case for why stops and leverage alone do not bound your loss.