This positive forex slippage gave me a 58-pip windfall
Forex slippage in my favour
Whenever we hear about forex slippages, a plethora of images of brokers out to cheat us of our money comes to mind. Today I encountered a slippage in a position I held over the weekend. I am very happy to report that this forex slippage happened in my favour. It gave me a windfall of 57.9 pips!
What exactly is forex slippage?
Binni wrote this article ‘Forex slippage: How slippage happens and why you need a good broker‘. This is how she defined slippage:
Slippage definition: A slippage happens when a limit order or stop loss is triggered at a worse price than the originally set price. Forex slippage is very frustrating and one reason for traders to encounter heavy unexpected losses. If you encounter slippage regularly during trading, you may have chosen a bad broker.
So why was I happy I was slipped?
It is important to realise that slippages can work in your favour as well. Unfortunately, most of us got very bad attitude towards slippages. When it happens against us, we are ready to pursue the matter with our friendly broker until the end of the Earth. When it happens in our favour, we keep quiet. Therefore a lot of information about ‘slippages-its-the-broker’s-fault’ is more myth than fact.
What is a positive forex slippage?
Positive forex slippage: The slippage happens when a limit order is triggered beyond target price. The likely reason behind such a slippage is a forex gap.
Can it really happen?
My Trade on GBPNZD gapped and filled beyond my target price
This was a trade which I did on GBPNZD.
I had a short position on GBPNZD that was set to take profit at target price 1.95346. The pair gapped below so that my order got filled at 1.94767 instead. The gap was printed because of a high impact news but that’s another story.
This is a price that is 57.9 pips in my favour.
The Bottom Line
Forex slippages are not always bad. It can be good but don’t make it a trading strategy to wait for slippages to happen in your favour. In my encounter, the broker filled my order to close at the best price available. The reason for slippage this round was a forex gap but a gap could equally happen against me. The next time you encounter a slippage, try to understand what happened in an objective manner. It is a feature of forex trading that cannot be eliminated and should not always be pinned on a broker all the time.