Slippage in forex
He trades mostly on the daily time frame. I advised him on a various ways he could minimize slippage and forex inspired me to write this post to share the knowledge with the world. Keep a lookout for high impact news. First key high impact news to avoid: Released on the first Friday of the month. Corresponding volatility due to Non-Farm Payroll news: Having your stop slippage in front of the big spike without expecting slippage is like standing in front of a bullet train and expecting to be able to stop it immediately. Second key high impact news to avoid: For example, if you trade NZDUSD on the daily chart, and you are expecting to hold your trades for a few days, then you should check the upcoming week for any non-farm payroll news, or any NZD or USD interest rate news. But if you trade 1 hour or below charts, it is best to avoid such news, by either closing your position, or waiting after the news to enter your trade. This is because a 20pip slippage is a large percentage of your profit. For example if you trade the hourly charts, you might have an average take profit size of 50pips. Why is there slippage in the first place? Is it because my broker is cheating me? Well in some cases, yes. But in most cases, no. You see, during such high impact news, the market moves extremely quickly. The order takes milliseconds to reach the market and by forex time, the price may have moved 10 pips from your original stop loss price. This is how slippage occurs. Alternatively, when your stop loss order is sent to the market and is matched with one of the liquidity providers LPs. The LP then decides the market is moving too fast and rejects to fill your order. Your order is then matched with the next LP who decides to fill your order. However, this is not to say that choosing no last look brokers will guarantee you get no slippage because in a fast moving market, during the milliseconds the stop loss order takes to reach the market, the price may have moved 10pips against you. Check the fundamental background of the currency pair you trade. Two very prominent examples are: I know this is on hindsight, but just let me share what could have been done to protect yourself. They raised interest rates from This may be a time bomb waiting to explode. Many brokers have already reduced their leverage on this currency pair to a max of Inthe Swiss central bank SNB announced a floor of 1. This means they will not allow the CHF to continue appreciating in value. The side effect of this QE is that the Euro will be devalued because of increase in supply of money. The euro started to fall in value against the swiss franc CHF and now we are at a point where the 1. Trade with a broker that has a guaranteed stop loss. How is it possible then? In order for a broker to provide a guaranteed stop loss, they need to trade against you. This means if you win, they lose and vice versa. One such broker with a guaranteed stop loss is IG Markets. You can upgrade your stop loss to a guaranteed stop loss by paying an additional 4 to 20 pips, depending on the market conditions usually during news the premium goes up. Because your trades are not sent to the real market and not matched with LPs, IG Markets is able to offer you such a service. This is similar to taking a 4 to 20pip slippage in advance to guarantee your stop loss. It would only be advantageous to take a guaranteed stop loss slippage expected slippage is greater than the additional cost of the guaranteed stop loss. So that completes my guide on how to avoid or minimize slippage in Forex Trading. Feel free to discuss in the comments below! Is this kind of brokers with guaranteed stop loss order always playing a zero sum game? Or they did so for guaranteed stop loss order only. The broker is trading against you zero sum game when they provide the service of a guaranteed stop loss order. In general, you should try to trade with brokers who are on your side. A-book you can read more here: Your email address will not be published. Abundance Trading Group Forex Rebates, Deep Discount Trading and More. How to avoid or minimize slippage in Forex trading By Linton December 20, Keep a lookout for high impact news Why is there slippage in the first place? Check the fundamental background of the currency pair you trade Trade with a broker that has a guaranteed stop loss How to avoid or minimize slippage in Forex trading? Keep a lookout for high impact news First key high impact news to avoid: Released on the first Friday of the month Corresponding volatility due to Non-Farm Payroll news: Related Posts Low spread Forex broker What is that? Which deposit currency should I choose? How to trade Forex Economic News What is A book vs B book in Forex slippage What is the difference between Market makers vs ECN vs STP brokers What is Last Look in Forex and how does it affect Slippage? Leave a Reply Cancel reply Your email address will forex be published. Like US on Facebook! Iconic One Theme Powered by Wordpress.
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