XM minimizes the slippage. Table of Contents
The Minimal Slippage on XM’s Accounts
Do you have any experience when you place a market order in FX, “The price when you clicked and the price when you made a contract were different”?
That is slippage.
It is an unavoidable keyword for those who carry out transactions that aim for short-term price movements or sudden price changes.
By knowing slippage, you can avoid unnecessary transactions and reduce transaction costs.
Slippages hardly ever occur if you trade with XM.
Sometimes, however, especially when important economic news is released, due to a sharp rise/fall in the market price, your order may be filled at a different rate than you requested.
At XM, your orders are filled at the best available market price, which may be to your benefit.
What is Slippage?
In this article, we explain the countermeasures from basic knowledge such as what slippage is and when it occurs.
In addition, we will introduce a Forex broker that has a good reputation for contracting with little slippage, which is also recommended for Forex beginners.
Slippage is a noun form of slip, and in FX, it means “a price shift from order to execution.”
For example, when you try to place a new market order.
If you press the order button when it is 1.00 USD, and if you actually contract with 1.01 USD, it means that a slippage of 1 cent has occurred.
Why Slippage occurs in the Forex market?
Forex trading cannot be completed without a counter party.
If you want to buy, there will be someone who sells, and if you want to sell, there will be someone who buys, and the trade will be established.
If there are enough buy and sell orders in the market, the order will be filled at the desired price.
On the other hand, when you try to buy or sell and either or both orders run out, it is difficult to fill at the desired price, and as a result of trying to fill even the price in the disadvantageous direction, Slippage occurs.
In addition, spreads may widen for the same reason if there are not enough orders.
When Slippage occurs often?
So what is the market price at which an order is likely to be unavailable?
Slippage is likely to occur at dawn or on holidays when the market price moves by 1 cent or more in a few minutes due to news statements and economic indicator announcements, and also when there are few market participants.
1. Slippage occurs when the market changes suddenly
First of all, when economic indicators such as the US employment statistics are announced, news statements, or when there is a sudden drop or soar, such as the “Swiss Franc shock”, price movements become one-sided temporarily and move the market price excessively.
Slippage is likely to occur during such sudden changes in the market price.
2. Slippage occurs when there is a few market participants
The other is that almost nobody participates in the market and there are few orders to buy and sell around the current price.
This includes before NY market closes.
During such times when the market is said to be thin, slippage is more likely to occur.
How to avoid Slippage in Forex?
Slippage is caused by the fact that the counter party leaves the market at that moment.
Therefore, slippage can occur in any market.
Here are 2 main methods to prevent slippage from happening.
1. Set slippage limitation
Before making a trade, you can set a slippage limitation which basically orders “Slippage up to this width is okay, please give priority to order completion”.
This is the allowable slippage, the wider it is, the easier it is for the order to pass, and the narrower the slippage, the harder it is for the order to pass.
If you want the slippage to fill at zero as much as possible, you can set the allowed slippage value.
By doing so, if slippage of more than the set value occurs, you can cancel the execution.
Allowable slippage can avoid trades that result in unexpected transaction costs, but the number of unsatisfied trades also increases, which can lead to opportunity loss.
Let’s look at am example. If you want a profit of 100 USD in a 10,000 currency transaction, the target price range is 100 pips.
At this time, if one trade is 100 pips, the transaction cost to pay is one time.
In other words, even if you slip a little, the impact on the overall balance is negligible.
Conversely, if you take 10 trades and take 10 pips each, you pay the transaction cost 10 times.
It can be said that the effect of slippage is 10 times greater than the former.
In this way, the narrower the target price range, the narrower the allowable slippage, and the wider it is, the wider the allowable slippage is.
2. Select a broker with high execution rate
It is also effective to select a broker that has a good reputation for contracts with few slippages.
There is the word “Execution Quality”.
It is often used in the sense of “how much to execute (without slippage)”, but there is no specific definition.
The execution rate is an indicator of the strength of order.
It’s how often you fill it, which often doesn’t include slippage.
The original execution rate is the rate at which orders are fulfilled without being rejected, including the occurrence of slippage.
If the order cannot be filled and the order is redone, it is called a order rejection.
See the list of online Forex and CFD brokers, in the order of popularity in the page below.
Know the actual Spread of your broker
In the FX industry, there is a lot of spread competition among Forex brpk, and the spread of popular currency pairs such as the dollar yen and the Eurodollar has narrowed to 0.2 – 0.0 pips, a level that can hardly be narrowed from here.
Of course, narrow spreads are a benefit for traders.
However, whether or not to execute according to the displayed spread is another matter.
Even if the displayed spread is 0.1 pips, if the average slippage of 0.5 pips occurs, 0.6 pips is the true spread.
The idea of this average slippage is subtle, and we can not understand it without actually trading.
Large slippages often occur when there are sudden fluctuations that are different from usual, so it is impossible to understand without collecting long-term data.
Furthermore, if the number of lots is large, slippage tends to occur, and even the same Forex company will change depending on the time zone.
Therefore, it is difficult to grasp the slippage on an individual basis, so trading with an Forex company that has a good reputation for execution may be a solid choice.
XM is one of the most popular online Forex brokers in the world, and you may find a number of reasons and reputations to choose XM as your broker.
XM also runs a number of bonus promotions to support its traders.
Visit the page here for the list of XM’s all bonus promotions.
Please check XM official website or contact the customer support with regard to the latest information and more accurate details.
XM official website is here.
Please click "Introduction of XM", if you want to know the details and the company information of XM.
IronFX
Comment by Diletta
March 26, 2024
Awesome bonuses, good leverage. A few hiccups, but support rocks!