Forex Slippage: the Sheer Significance of a Term

Sep 11 • Forex Trading Articles • 1185 Views • Comments Off on Forex Slippage: the Sheer Significance of a Term

Without a doubt, most novices in currency trading have one question in mind: what exactly is forex slippage? Indeed, even those just beginning to appreciate the moneymaking potential of the currency market should not overlook the significance of having enough knowledge about such a trading phenomenon. After all, a mere slippage might mean the difference between profits and losses. Of course, budding forex traders might be worried that learning about slippage would be a most difficult endeavor. In truth though, gaining a sufficient understanding of slippage is as effortless as continuing to read on.

Forex slippage as a term is definitely easy to comprehend as it has a fairly straightforward definition. To put it simply, slippage pertains to an event in which a trade is completed at a lower exchange rate than what was originally stated. In this sense, it would be appropriate to consider the abovementioned phenomenon as synonymous with losses. With this in mind, it becomes clear that one should focus on a task that is much more important than merely knowing the meaning of slippage: learning about the best means of avoiding such a detrimental event.

Those who are experienced in currency-trading endeavors would surely agree that refraining from making transactions during certain instances would be the most effective way of dodging the effects of forex slippage. For one, it would be most advantageous to steer clear of any activity that involves the currency market when major financial news are about to be released. In a similar sense, if there are any upcoming changes in a country’s lineup of top government officials, then it would be wise to avoid deals that involve the nation’s currency for a while. Indeed, any event that affects volatility has the potential to bring forth slippage.
 

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It should be pointed out however, that forex slippage is also associated with scams. After all, there are brokers that make it a point to hold transactions for the sake of profit: as some say, when a trader makes money, a forex agent fails to grab an opportunity. With this in mind, it becomes clear why the most successful of traders never fail to scrutinize a broker’s “records” before availing of any of its services, making sure that it does not engage in any kind of underhanded “business tactics”. Essentially, even novices in forex trading should never fail to think about the presence of “manipulated slippage”.

Simply put, slippage is not that complicated a term. To reiterate, slippage represents the gap between the time in which a transaction is initiated and the moment during which it has finally been carried out and completed by the broker and thus, an “exchange rate discrepancy” emerges. As also emphasized, it is possible to avoid slippage by keeping watch of upcoming events that might alter the market’s volatility. Of course, it would also be best to avoid forex agents that manipulate the time at which transactions are completed so as to take advantage of slippage. All in all, forex slippage is as important as any other forex term.

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