“ECN technology without requotes and slippage” – it is this phrase, including brokers, that attract novice traders. Experienced traders know how to check the direct conclusion of transactions in the interbank market, traders without experience believe the broker is losing money. What is slippage, is it always the broker’s fault, how to minimize the effect of slippage in Forex, read on.
Forex slippage: eliminate the causes
Imagine the situation: you see a target level of 1.1517 on a growing trend, open a position, but … The deal opens much later at the level of 1.1521, which does not correspond to your risk management. The first thought is to blame the broker, who is not profitable to share profits, but not so simple.
Recall there are two types of brokers:
- “Kitchens” that conduct transactions within their system. The loss of a trader is their income, but there are many other ways how to deprive a trader of a deposit. For example, simply do not allow withdrawing money due to not going through verification;
- brokers that bring customers’ transactions on the over-the-counter market to liquidity providers. They earn on margin because they are not interested in Forex slippage.
Now imagine another situation. In the market there are proposals for the purchase of an asset at a price of 1.3145 and 1.3148. You are going to buy the asset at the first price, but … The transaction is not made, and the broker asks you if you are ready to buy the asset at a higher price 1.3148. While you are reading the broker’s request and confirming it, this price has already been slaughtered by faster traders buying the entire volume of this level. And the broker’s fault is not.
Causes of Forex slippage:
- weak (slow) internet;
- network delays in the “trader (platform) – broker – liquidity provider” scheme;
- a large market volatility and lack of reaction from market makers, who must hold back a rapid rise or fall in the price of accumulated stocks of an asset.
It is possible that there is wine and the broker who manipulates the quotes, because each case is different.
Methods of dealing with slippage:
- setting the appropriate settings in MT4, in particular, “Use the maximum deviation from the requested price.” In a situation where everything is decided in a fraction of a second, MT4 will open a deal without a request. However, due to the peculiarities of the brokers’ servers, deviations are possible here;
- the use of pending limit orders, which pre-book part of the liquidity. There are cases when they do not work. In such cases, all questions to the broker;
- trading on long timeframes. Redrawing indicators, slippage in Forex, price noise – all this will greatly interfere on the M1-M5 timeframe. At hourly intervals and above – hardly;
- Do not trade at the time of the news release. In a falling trend, there will be a lot of people willing to sell an asset, a little to buy;
- using a volatility filter. If the slippage is 10 points with a planned income of 30 points, then you will not receive 30% of the profit. So you need to work with an asset that can bring 40 points of income.
These basic work rules will help avoid slippage in Forex. If they did not help, clean the platform from temporary files or change the broker. Join the discussion of the article and share your own experience!