Understanding slippage

eyokoo · Jun 22, 2009

I am a newbie in trading. Recently opened a CFD account with IG Markets just to get an idea of how things work.

Early Friday morning, before market open, I left an order to open for Barclays stock at 269p. I had the impression the share price will be moving up so I opened a long position which I intended to close same day.

When market opened, I went back to check my account, although Barclays was now trading at 275p, my trade was in a loss. I had been opened at 277p, a whopping 8p more than I intended! I called IG Markets and was told that it was ''slippage'' due to ''market volatility''. I could understand if I was opened at 270p or even 272p but 8p seemed a steep price to pay for slippage. I thought slippage meant that once the target price is hit without a trade being executed, the trade is executed at the next available price. At no point did Barclays SP go from 269p to 277p.

Please, for all the more experienced traders, does this sound plausible? Is a nearly 3% ''slippage'' premium, difference between my requested price and the executed price, within the realms of normality in trading?

Calinor · Jun 22, 2009

Price can spike around a bit at the open, and no doubt the spread is larger too. I don't know what the typical spread is for Barclays (1-2 pts?) but at the open, that spread might be wider even. And on my IG chart it did spike up from 271 to 278 in the very first minute. Add in the spread, and it might account for it. It does seem a lot though when you consider it is 3%.

If you're really not happy, complain to IG, you never know. But in future perhaps be careful about trading on the open like that.

Black Swan · Jun 22, 2009

eyokoo said:
I am a newbie in trading. Recently opened a CFD account with IG Markets just to get an idea of how things work.

Early Friday morning, before market open, I left an order to open for Barclays stock at 269p. I had the impression the share price will be moving up so I opened a long position which I intended to close same day.

When market opened, I went back to check my account, although Barclays was now trading at 275p, my trade was in a loss. I had been opened at 277p, a whopping 8p more than I intended! I called IG Markets and was told that it was ''slippage'' due to ''market volatility''. I could understand if I was opened at 270p or even 272p but 8p seemed a steep price to pay for slippage. I thought slippage meant that once the target price is hit without a trade being executed, the trade is executed at the next available price. At no point did Barclays SP go from 269p to 277p.

Please, for all the more experienced traders, does this sound plausible? Is a nearly 3% ''slippage'' premium, difference between my requested price and the executed price, within the realms of normality in trading?

It is simply one of the hundreds of issues/thousand cuts you will experience trading; welcome to the jungle.

TheGoose · Jun 22, 2009

I think that is a bad fill, the open was 272.25 so I would have filled you there + 1/2 spread

Jaydee · Jun 22, 2009

The order you placed is, effectively, the same as using a stop order to open a trade. As a rule of thumb, don't use stops to open trades (especially, not on the open where spreads are wide and the book is thin), use them to close trades only. Simple reason for this is, when you are losing it is best to get out of the trade regardless of a bit of slippage - the alternative option of staying in is usually worse. However, when opening a trade you obviously don't have a position to go against you and, therefore, you can be a bit more selective when it comes to price.

Black Swan · Jun 22, 2009

TheGoose said:
I think that is a bad fill, the open was 272.25 so I would have filled you there + 1/2 spread

D'ya not think that the poster's overall strategy is just plain wrong, irrespective of the cost of the spread?

TheGoose · Jun 22, 2009

Black Swan said:
D'ya not think that the poster's overall strategy is just plain wrong, irrespective of the cost of the spread?

That's not why I was posting though. I was dealing with the where he should be filled aspect.

If it opened at 272.25 and let's say it was a rolling SB contract, he would be filled at 272.50. As a SBing market maker that is where I would fill him, so I think he should ask for refund of 4.50x stake. They will be covered in the rules and might say no but I think that it is 'fair' to be refunded.

In regards to the strategy, it's up to him. It's effectively a market on open order and i've seen many times the FTSE future open at the high or low of the day, so that strategy can work well.

I do agree with your earlier post though - it's all part of the trading experience and he'll get plenty of surprises/knocks along the way.

raysor · Jun 22, 2009

eyokoo said:
I am a newbie in trading. Recently opened a CFD account with IG Markets just to get an idea of how things work.

Early Friday morning, before market open, I left an order to open for Barclays stock at 269p. I had the impression the share price will be moving up so I opened a long position which I intended to close same day.

When market opened, I went back to check my account, although Barclays was now trading at 275p, my trade was in a loss. I had been opened at 277p, a whopping 8p more than I intended! I called IG Markets and was told that it was ''slippage'' due to ''market volatility''. I could understand if I was opened at 270p or even 272p but 8p seemed a steep price to pay for slippage. I thought slippage meant that once the target price is hit without a trade being executed, the trade is executed at the next available price. At no point did Barclays SP go from 269p to 277p.

Please, for all the more experienced traders, does this sound plausible? Is a nearly 3% ''slippage'' premium, difference between my requested price and the executed price, within the realms of normality in trading?

Well it certainly isn't "slippage". In fact I can see nothing wrong with the trade. You put an order on at the open (presumably 'at best'), or just before and it must have been filled in just under a minute--well within the required time scale. If you are 'trading' which presumably you are then you need to be more careful.
Almost as bad as me: Had a limit order of 261p (Thurs, I think). Got down to about 263/4 so just missed it!
OH, sorry just re-read your question. Did you mean you put a limit order at 269? If so just complain and you will get satisfaction.

eyokoo · Jun 22, 2009

Thanks a lot everyone for the advice.

I went down this route, leaving an order to open at market close, because I can't trade while I'm working. It seems to it's best to only trade during market hours so you can keep an eye out on what's happening.

@Raysor

I meant that I left a limit order to open at 269p, not an order to open ''at best''. At 277p, they filled me at almost the highest price for the day, the day's high was 278p.

raysor · Jun 22, 2009

eyokoo said:
Thanks a lot everyone for the advice.

I went down this route, leaving an order to open at market close, because I can't trade while I'm working. It seems to it's best to only trade during market hours so you can keep an eye out on what's happening.

@Raysor

I meant that I left a limit order to open at 269p, not an order to open ''at best''. At 277p, they filled me at almost the highest price for the day, the day's high was 278p.

Someone here doesn't know what a limit order is and it's not me! If you put an order on to buy at a limit of 269p (what's all this 'order to open at market close' is that time or price??) go back to IG and tell them to cancel the trade). They have failed to follow your instructions, by my reckoning 277p is above your limit. If they don't do anything tell them it is an official complaint and wait for their better answer.

Understanding slippage

eyokoo

Newbie

Calinor

Active member

Black Swan

TheGoose

Well-known member

Jaydee

Established member

Black Swan

TheGoose

Well-known member

raysor

Established member

eyokoo

Newbie

raysor

Established member

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