Slippage is the silent profit killer in futures trading. It’s what happens when your order fills at a different price than expected — often worse. While it’s part of the game, especially in fast-moving U.S. futures markets, understanding and managing slippage can make a big difference to your bottom line.
Why Slippage Happens
Slippage usually occurs when markets move quickly, spreads widen, or there isn’t enough liquidity to fill your order at your target price. A market order during volatile hours — say, right after a news release — might fill several ticks away from your intended price. The result? Less profit, or even an unexpected loss.
Can You Predict Slippage?
Not exactly. There’s no precise tool or data provider that can tell you future slippage. But smart traders can estimate it with some hands-on observation.
4 Ways to Estimate Slippage
- Place Small Test Orders: Try trading 1 contract during different times of day and compare your expected price to the actual fill. Track it.
- Monitor Bid-Ask Spreads: A 1-tick spread is normal in liquid contracts like the E-mini. If spreads widen, slippage risk rises.
- Use ATR as a Volatility Gauge: The Average True Range tells you how fast a market is moving. Higher ATR = higher slippage potential.
- Watch Event-Driven Moves: Big news events, open/close sessions, and thin overnight hours usually lead to bigger slippage.
Slippage Hurts More on Lower Timeframes
If you’re scalping 5–10 tick moves, even 1–2 ticks of slippage can ruin your risk-reward ratio. Swing traders holding for 100+ ticks? They barely feel it. That’s why many traders move to higher timeframes — it helps slippage become less of a threat.
How to Reduce Slippage
- Use limit orders when possible to control entry price.
- Trade during high-volume hours to avoid thin books.
- Avoid placing orders during high-impact news events.
- Scale into large orders instead of dumping them all at once.
- Adjust your strategy to factor in average slippage — don’t assume perfect fills.
Final Thought
You can’t remove slippage, but you can manage it. At PickMyTrade, we always recommend traders include slippage in their strategy testing and use R-based risk management to absorb its effects. The more realistic your expectations, the more reliable your trading results.
