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Stop slippage

The gap between your stop price and the price you actually get, which is always against you on a triggered stop.

A triggered stop becomes a market order, and market orders pay whatever the book offers. In a liquid stock at midday that is a cent; in the same stock on an earnings gap it can be dollars.

The asymmetry is the point. Slippage on a stop is one-directional by construction - you are selling into falling liquidity or buying into rising prices, always alongside everyone else with the same level. Measure it: record planned exit versus filled exit for every stopped trade and you will typically find real losses run 5-20% larger than planned in liquid names and far more outside them.

Budget for it rather than being annoyed by it. If your average stop slippage is 8%, your 1% risk rule is really a 1.08% rule, and your expectancy calculation should use realised exits, not planned ones. See slippage-budget.

Related: slippage-budget, slippage, hard-stop, worst-case-loss

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.

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