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Fast market

A period when prices move faster than quotes can be maintained, so displayed prices become unreliable and executions land well away from what the screen showed.

In fast conditions market makers widen or pull quotes, queues churn, and the latency between your screen and the matching-engine stops being trivial. Some venues formally flag the state; in practice you recognise it by quote flicker and by fills that bear no relation to the last print.

Every order type behaves worse. Market orders slip, stops trigger and fill far away, and limit orders that would normally fill simply do not.

Example: a rate decision drops and a futures contract moves 22 ticks in 400 milliseconds. You click a bid at 5,002.00; by the time your order reaches the engine the bid is 4,996.75 and you sell there. That 21-point difference on one contract at $50 a point is $1,050 of slippage from a single click.

Related: latency, quote-fade, stop-order-slippage, market-order-collar

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Slippage on a market orderA buy order clears four price levels, so the average price paid is worse than the price first quoted.Buy 1,000 shares at marketpricesell orders resting (bar length = size)20.04300 shares20.03200 shares20.01200 shares20.00300 sharesnothing resting at 20.02order sweeps up the bookaverage fill 20.02SLIPPAGE0.02 a share$20.00 in totalintended 20.00Each level fills at its own price; the average is what you really paid.
Slippage on a market order. You click at 20.00, but only 300 shares are resting there, so the rest of the order fills at 20.01, 20.03 and 20.04. The average price paid is 20.02, and that two-cent gap is slippage.

Educational only, not advice. Spotted an error? Post in Site Feedback.