Slippage in financial markets refers to the difference between the expected price of a trade and the actual price at which the trade is executed. It can occur due to:
Market Volatility: During periods of high volatility, prices can change rapidly, leading to slippage.
Order Size: Large orders can impact the market price, causing slippage.
Liquidity: In markets with low liquidity, it may be difficult to execute trades at desired prices, resulting in slippage.
Order Type: Market orders are more prone to slippage compared to limit orders, which set a maximum or minimum price for execution.