Can You Control Slippage?

Slippage is the difference between where you try to enter a position and where you actually get filled.

To trade with no slippage means you got all the shares you wanted right at the lowest ask price, or you sold all the shares you wanted at the highest bid price. To the extent that you dip below those levels, that amount is slippage.

Slippage is simply an unnecessary expense, and it can really add up.

This matters in different ways depending on whether you are day trading, swing trading, or long-term trading. It generally matters more in day trading because the smaller the trade objective, the more slippage can cut into your profits.

The smaller or less liquid the stock is, the more slippage can become a problem.

Can you trade with no slippage?

Absolutely, yes. You 100% can do it.

There are two ways to do it. One is by using a limit order, but there is a serious problem with that. The other is by trading stocks that are very, very liquid.

Pure liquidity matters. Ford, for example, often has large size on the bid or ask. Several stocks trade like that, but many stocks are a lot tougher.

The simple problem with a limit order is that while it can limit or eliminate slippage, it can also cause you to miss trades. Missing a trade can cost more than the slippage would have cost.

What if you do not use a limit order, or the stock is not that liquid?

There are still several tactics that can help you trade with almost no slippage, or at least greatly reduce slippage when you need to take the trade. Some of these tactics are not things traders would normally think of, but they can be the most important ones.

Controlling slippage is a more extended topic,, so see the additional resources on the DTS Free Stuff page: Controlling Slippage, and The Tradability of Stocks. And there’s also a DTS Podcast: Slippage an Advanced Talk..

Additional Resources