No matter how proficient you are in trading strategies, understanding the principles of global markets, and applying professional trading techniques, you may still be prone to losses due to potential pitfalls of forex trading. This is exactly how experienced traders refer to these two connected phenomena of requotes and slippage that are impossible to control. It is time for us to figure out the secrets, principles, and ways to avoid these unpleasant things on Forex.

Understanding requotes and slippage

Before delving into the topic, let’s admit that slippage is a very common phenomenon on Forex. Moreover, it usually causes no inconvenience to traders when market conditions are normal. However, trading is a real-time process with constantly changing market conditions. So, permanence and stability is something traders can only dream of.

Sometimes the rate can rapidly change between the time when an order is placed in the trading platform and the time it is executed in the market. This is how slippage occurs. In essence, it is the difference between the expected price set in the order and the price at which the trade is actually executed.

Slippage occurs every time there is an abrupt change in price that can happen within seconds when an order placed by a trader is processed by a liquidity provider. As a result, execution of an order at the intended price is no longer possible. Depending on the price direction, slippage can be positive or negative.

Based on the slippage definition, we can easily explain the notion of requotes since these terms are closely related. So, requote is a repeated request by a trader via a brokerage firm to execute an order at a new price. The reason behind requotes is the same as behind slippage. In the case when the price is changing rapidly and the broker can execute an order only at the specified price, requotes can be a big problem for speculators who trade on positive news.

Notably, slippage will be minimal or there will be no slippage at all if you choose a popular and high liquid asset. In the case of a less popular and non-liquid asset, you will probably have to agree to the price offered to you as a result of slippage. The difference may sometimes range from 5 to 10 pips.

Why does slippage happen?

These are the most common reasons for slippage on Forex:

  • high market volatility. Strong price fluctuations in the market may happen amid the publication of important macroeconomic news or statistics*;
  • delayed execution of orders caused by disruptions on the side of a broker or a trader at the moment an order was placed. It sometimes happens that the market has moved at the moment the trade was opened. The longer it takes to open a trade, the larger the slippage is. In this case, traders can only hope that slippage will be positive.
  • fraudulent actions by intermediary companies. This is the case of the so-called forex bucket shops* which are brokerage firms that delay clients’ orders on purpose to profit on their losses. When choosing a broker, it is important to study traders’ feedback online as well as various ratings. For example, InstaForex is in the top 10 most reliable brokers on Forex in 2021.

*Please note that you can find the most up-to-date news and monitor the latest economic changes in the special Forex analysis and reviews section on InstaForex website.

*Bucket shop is a brokerage company that does not place traders’ orders on the exchange, and their transactions go "in the bucket" and are never executed.

How to avoid slippage?

Fortunately, there are several technical tricks at traders’ disposal that help reduce the impact of slippage on a trade. However, none of these methods can guarantee that slippage won’t occur. Still, they can minimize the risk of losses when slippage happens.

  1. When placing an order on the MetaTrader4 platform, traders can set a slippage limit, that is, the maximum deviation from the quoted price in pips. In case when slippage exceeds the limit, the trade will not be opened and the order will not be executed. Instead, a trader will get a message with a new price – a requote. That is why responsible brokers pay special attention to speed and accuracy of order execution. InstaForex is proud to have one of the most impressive results in the industry with zero cases of slippage and requotes. When choosing InstaForex, you can count on instant order execution and be sure that your trades will be opened at the best market price at a given time.
  2. Using pending orders (limit and stop orders) as well as stop-loss and take-profit orders helps avoid slippage most of the time. Yet, they are less effective amid high volatility in the forex market.
  3. When choosing a forex broker, you should pay attention to the technical aspect of order execution rather than to promo campaigns and bonuses. Trustworthy brokerage firms present the speed of order execution as their main competitive advantage.

Conclusion

Naturally, slippage and requotes on Forex are unpleasant and loss-making factors. The only way out is to choose a reliable and safe intermediary company for trading. Do your homework and read trader’s feedback, analysts’ reviews, and international rating of forex brokers. Do not rely on quick bonuses and promo campaigns. Instead, choose a high-quality brokerage and apply pending orders in your trading so that you can minimize sudden losses as much as possible.