Trade Latency and Slippage

Have you noticed that sometimes a trade would hit target 1 in the dashboard but it did not sell any of your coins? This is due to something traders call a Slippage. To understand Slippage, you need to know the root cause behind it: Trade Latency. 

What is Trade Latency? 

In trading, latency is the time delay between an order being placed and its execution. With fast-moving markets, the lower the latency, the higher the possibility of filling an order at the displayed price before it changes. With high latency, your order might not be filled at the displayed price and gets filled at another price (usually very near your desired price). When your order gets filled at a different price, that is what is called a slippage. Below is an example:

This is Bitcoin on the 5 minute chart:

This is the same but on the 1 minute chart: 

What is a Slippage? 

By definition, Slippage refers to the difference between the expected price of a trade and the price at which the trade is executed. 

An Example of Slippage

Slippage can occur at any time but is most prevalent during periods of higher volatility when market orders are used. It can also occur when a large order is executed but there isn't enough volume at the chosen price to maintain the current bid/ask spread.

Let's have an example on the 1-minute chart (LTOUSDT): 

You can see that the price hit target 1 but it was on a wick that lasted only for a few seconds. 

During the initial instance where the price hit the target, the price stayed at that level for a very short moment (less than a minute) before going back down which resulted in many sell orders not triggering (yours included). 

This usually happens only for coins that have thinner order books. 

The system is usually accurate within a few seconds. Sometimes, crazy price action like this can occur but  all platforms will have an issue with such speed/latency.

There are two ways you can adjust to these kinds of scenarios:

  • If you are not experienced enough to read charts, exit the trade and sell your coins manually then move on to the next trade.
  • If you can read the charts, then consider staying in the trade but think about moving the stop loss up to the entry price to protect your funds. 

Slippage can work to your advantage

Sometimes a slippage can work to your advantage. Consider this trade made by one of our members.

The stop loss for this SANDUSDT trade was hit and the system closed the trade as a losing trade. However, due to a slippage (where the stop loss was only touched for a second), the member was not stopped out. 

The trade then bounced and went on to increase 10% from the stop loss, allowing the member to exit the trade with a gain instead of a loss. 

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