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⚡ Slippage Reality Check
Slippage is your size against the size resting in front of you. Lesson 11 shows the same money costing $0.30 in one instrument and $80.00 in another.
💡 The Hidden Tax
Slippage is the invisible tax on every trade. Market orders, wide spreads, and low liquidity can destroy edge before you even realize it.
The Hidden Cost of Slippage
Slippage is the difference between your expected price and actual execution price. It seems small per trade, but compounds to devastate your edge over time.
⚠️ The Brutal Reality
Slippage of just 0.1% per trade (entry + exit = 0.2% round trip) means:
- 100 trades = -2% account drag
- 500 trades = -10% account drag
- 1,000 trades = -20% account drag
Your strategy might be profitable, but slippage makes it a loser.
✓ Limit Orders (Patient Trader)
- Target: $100.00
- Filled: $100.00
- Slippage: $0.00
- Edge preserved
❌ Market Orders (Impatient Trader)
- Target: $100.00
- Filled: $100.20
- Slippage: $0.20 (0.2%)
- Edge eroded
How Slippage Destroys Edge
Example: Scalping Strategy
Strategy edge: 0.3% per trade
Slippage: 0.15% entry + 0.15% exit = 0.3%
Net edge: 0.3% - 0.3% = ZERO
Profitable strategy becomes breakeven due to slippage alone.
✓ Reducing Slippage
- Use limit orders whenever possible
- Trade liquid instruments (tighter spreads)
- Avoid market orders during volatile periods
- Check bid-ask spread before entering
- Trade during active hours (avoid pre-market/after-hours)