Dealing with Forex Slippage

Aug 7 • Forex Trading Articles • 1815 Views • Comments Off on Dealing with Forex Slippage

Forex slippage is something we cannot avoid. What we should avoid are forex brokers who unfairly use slippage as a reason to milk clients dry. But how do you know which brokers are these? Well, the best way to find out is to compare the slippage and execution of each broker you wish to deal with and make it a point to deal only with those with low slippage.

The best way to deal with forex slippage is not to deal with it. Confusing but it’s true. What it means is you should trade forex only through brokers who have low or no slippage at all and who can guarantee the execution of stop loss orders. Remember that slippage concerns traders only at the time when they exit their trades during volatile markets.  Quite often, brokers intentionally do not execute your stop loss order as they stand to benefit from the resulting slippage. To avoid such a situation, you should deal only with brokers who guarantee the execution of stop loss order. This way, you are sure that no slippage will occur.

Slippage can eat up on your profits or increase your loses. Although there will always be slippage in foreign currency trading, it is still important that you minimize your exposure to such risks by dealing with brokers who are not there just to make a fast buck on you.

The best places to get information about forex brokers and their execution and slippage rating are from forex forums where other experienced traders share their experiences with various brokers. You can even pose questions on these forums and inquire about the different brokers and their ratings on slippage and order execution.

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Another way not to deal with forex slippage is to abstain from trading during times that high impact news are scheduled to be released. In other words avoid trading the news that is largely expected to have a profound impact on the market.

But then, why trade forex at all when you will just avoid market volatility? You won’t be able to take the big trades that way because big trading opportunities show their beautiful heads at the time when market volatility is at a high and trading volume is picking up.

You should only concern yourself with slippage when you are dealing with brokers who just want to make a fast buck. They manipulate price quotes during volatile markets so as they gain more for themselves. Although there are now safeguards in place to prevent brokers from taking advantage of their clients during volatile markets, there will still be errant brokers who would want to take as much money from you as possible. They won’t give you a fair playing field because, as market makers, they can manipulate price quotes to prevent you from getting out of the market at the price you want to.

Volatility is fodder for forex traders. They thrive on it because the best money making opportunities come with volatile markets and slippage happens to be a small price to pay to take this high probability trades.

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