Smart position sizing & risk management

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Order Types

Slippage

The difference between the expected price and the actual fill price, usually caused by fast-moving markets or low liquidity.

What is Slippage?

Slippage occurs when you get filled at a different price than expected. You click buy at $50.00 but get filled at $50.05: that 5 cents is slippage.

Causes

  • Market orders: you take whatever price is available
  • Low liquidity: not enough shares at your price level
  • Fast markets: price moves between when you click and when the order reaches the exchange
  • Large position sizes: your order moves the market

Reducing slippage

  • Trade liquid stocks with tight spreads
  • Use limit orders when possible
  • Avoid trading during extreme volatility
  • Size positions appropriately for the stock's volume

Related Terms

Bid-Ask Spread

The difference between the highest price a buyer will pay (bid) and the lowest price a seller will accept (ask).

Fill

When your order is executed: 'getting filled' means your buy or sell order has been completed.

Limit Order

An order to buy or sell at a specific price or better. Only executes at the limit price or more favorable.

Liquidity

How easily a stock can be bought or sold without significantly affecting its price.

Market Order

An order to buy or sell immediately at the best available price. Guarantees execution but not price.