Forex Caution: Be Prepared to Deal with Slippage as a Currency Trader
Posted by Edward Dy on June 23rd, 2008
|
Photo Credit: linuxtuxguy
Let us suppose that you were able to purchase the EUR/USD currency pair at 1.4000 and it is trading now in the market at 1.4025. Because of an anticipated economic release which will be due in about 15 minutes, you shift your protective stop to up to the level of 1.4000 to prevent your winning trade from becoming losing trade. When finally the figure is released, you see that the market trades down right through your protective stop and dipped way below it to 1.3975 in just a few seconds. This can leave you frustrated because instead of the forex trade going your direction at 1.4000, you are instead getting 1.3990 and your once winning trade have become a losing trade.
This can happen to anybody if there was no one who would stand at the other side of trade at your price. A trade happens when two people think that the price is right but do not agree regarding the value.
So if it happened that the market took you on your 1.4000 stop level, then your order will then become a market order. When you are not matched up with a buyer, but only purchase below your sell stop price, the process of being filled at that lower level is called slippage and can be found in every market.
As a currency trader, you must always be prepared to deal with slippage, for it is the nature of forex trading.
TradingSolutions:Financial analysis and investment software that combines technical analysis with neural network and genetic algorithms.
Commercial Forex Trading Secrets Revealed
Play to Win $50,000 - Fantasy Stock Trading Game
Forex Trading Courses