I have been using demo accounts for a while now and so far my favourite has been the downloadable desktop platform from FXCM. The only problem is that I read a lot of comments from a good few years ago about FXCM having big slippage problems in their stop losses not holding up. I read that this can’t really be helped as its the risk that can happen during a big news event? Is this true or have FXCM fixed that problem or gotten better at it over the years? If not are there any brokers that can defiantly garuntee abstop loss or is it just a risk that traders have to accept?
Your broker will try to close of your trade at your set stop-loss but look at it this way: if you buy a currency, you open a long position & in order to close that trade, you need to sell the currency. What your stop-loss is doing is “selling” your currency for you at a predefined price. Now like your old car or tv etc. you can’t sell it unless someone wants to buy it.
Slippage should be very minimal during normal trading times but with high impact news releases, as you are probably aware, price can move very quickly & this volatility is what causes the slippage. Your broker will try to meet your SL but if not, it will closes it at the the best price that it can after your SL. All brokers suffer it & I’m afraid that it’s just a risk that we all face. I can’t comment on how bad FXCM were or if they have got better though - sorry.
Brilliant thanks for that, that has really cleared it up for me
You will get slippage with all brokers, it cant be avoided as Baz explains.
If you’re really worried then dont trade around news events or close trades beforehand.
There is no absolute guarantee when it comes to trading. I don’t think any broker offers a guarantee on the price and it is part of the risk when it comes to trading.
Nice suggestion but sometimes all the news are not pointed out. Some moves are sudden and deadly. To avoid this a trader can open multiple accounts and keep himself from getting wiped out completely.
[QUOTE=“forexcrisp;694495”] Nice suggestion but sometimes all the news are not pointed out. Some moves are sudden and deadly. To avoid this a trader can open multiple accounts and keep himself from getting wiped out completely.[/QUOTE]
Why open multiple accounts when you can just open one & run it properly? All you need is proper risk/money management & you’ll be fine. Slippage will affect us all at some point & you just deal with it.
The whole shebackle with the Swiss Frank is an extreme example of slippage but that is a freak occurrence - don’t let that put the fear of God in to you.
Trade as normal, have your SL’s in place (maybe wider if you know that there’s a news release due) & as always, only risk what you are prepared to comfortably lose & that final point goes for ALL trades, not just those around news releases.
For a moment wondered if the topic was on prediction or protection…lol, anyway as others have pointed out, slippage is part of the picture where all brokers are concerned and if a broker claims that they have no slippage, well, simply put, they are lying their “you know what” off…
Unfortunately yes, the only way to deal with slippage is to put up with it:mad: Sorry for pun
As far as I know FXCM takes the opposite side of your trades (makes market for you in other words). For somebody trading with MM may be unacceptable because of conflicts of interests, but it should work for newbie, though.
I prefer to trade with true STP brokers like Hotforex which doesn’t care if you’re losing trader or PRO, but still I get slippage there because it’s normal market phenomenon which we should avoid or find workarounds for. One of them - split up your position to smaller ones (common sense says smaller order has more chances to get executed than bigger) and second is diversificate losses, means trading with several pairs which should cover each other in case there are losing trade appeared…
Good luck in your trading dude!
Hi Cabumbo,
As others in this thread have already said, anyone trading in the forex, stock, or futures markets, has to be willing to accept the risk that goes along with having orders executed during illiquid market conditions. There’s no sugar coating this. Slippage is one of the risks you assume when trading.
It helps to understand why slippage occurs in the first place.
If your stop loss order price is reached, then it is executed as a market order. You may want to sell at a certain price, but there has to be a buyer on the other side to complete that transaction. If there is no buyer at your stop price, then the order will be filled at the best available price. If the market gaps through your order price during an illiquid market period such as the weekend open or NFP, then you will likely experience slippage.
The risk of slippage is greatest during volatile markets such as around a news announcement like NFP, or when holding trades open over the weekend. Speaking of NFP, take a look at the below chart which shows the GBP/USD tick chart right at 8:30am ET during the March 8, 2013 NFP release.
[B]GBP/USD dropped from 1.50361 to 1.49972 in one tick. Yes one tick![/B] That means there were no quotes quoted by the liquidity providers in between those prices. If you had an order to sell GBP/USD at 1.5020, your order would not have been filled at 1.5020 because there was no quote at that price from a liquidity provider offering to buy when you wanted to sell. You likely would have been filled at the next available price around 1.49972. FXCM isn’t deciding to fill or not fill at certain prices, your orders are filled based on liquidity and where there is liquidity on the other side of the transaction to fill your order.
Also, keep in mind that unlike with some other brokers, slippage at FXCM works both ways. If you have a limit or take profit order, and the price gaps in favor of your trade, then you will get filled at the more favorable price which is trading in the market. This is called positive slippage or price improvement.
A study of over 43 million orders executed through FXCM over a 12-month period from September 2013 through August 2014 found that 53.32% of all stop and stop entry orders received negative slippage. However, the same study showed that over 60% of all limit and limit entry orders received positive slippage.
That’s due to the momentum of price movement when such order types are triggered. Stop orders are triggered when the price is moving against your trade, while limit orders are triggered when the price is moving in favor of your trade.
The year-long study of trades executed through FXCM also revealed the following:
[ul]
[li]73% of all orders had no slippage.
[/li][li]15% of all orders received positive slippage.
[/li][li]12% of all orders received negative slippage.
[/li][/ul]
Over the course of that year, FXCM clients benefited from over $21 million in positive slippage.
It’s worth noting that the Market Range feature on our Trading Station platform and the Enhanced* Maximum Deviation feature on our MT4 platform allow FXCM clients to limit the amount of negative slippage they receive, while still enjoying the full benefits of any positive slippage that’s available.
[I]
- On the MT4 platforms of some other brokers, the Max Dev feature is unavailable, or if it is available, then it will limit both your negative slippage and your positive slippage equally. By contrast, FXCM enhanced how Max Dev works on our MT4 platform allowing you to limit your negative slippage while still enjoying the full benefits of any positive slippage.[/I]
FXCM offers traders No Dealing Desk (NDD) forex execution, AKA Straight Through Processing (STP). On the NDD model, we don’t profit from your losses or lose from your profits. Instead, we offset each of your orders one-for-one with the best available prices from competing liquidity providers and make money off your trading volume. That means, we want you to be profitable, so you can continue trading with us.
Cheers for that, much appreciated
A nice explanation Jason and been a happy trader with you guys for a while now; it would have helped had you posted a couple of charts for limit orders and SL, given the query but still a nice exp…
Trade small, Trade diversified, Trade long term, Trade only a small portion of your total capital.
And have a good craft beer.
-Adrian
Craft beer? lol
I would call that a perfect trading system 
am i the only person that finds such huge slips on a stop loss a little bit disturbing? (regardless of which particular broker). how do you mathematically build that into money management and risk reward ratios? (‘only risk what you are prepared to loose’). nfp / the dollar will have a similar effect on most currencies etc at the same time so diversified might not mitigate much. trading small might just mean you have more effective free balance available to get wiped out. it could really ruin your day, and presumably any other open trades that get closed on margin call. etc. trade on a account with such low funds that such a disaster leaves a dead account with a big negative balance rather than a big zero where your big balance was? (will the broker bill you for the negative balance?) i do appreciate that gaps etc are all part of the game but if i can’t figure what i stand to loose with reasonable accuracy then i have a problem especially if news is exactly the time at which i want to be trading. a straddle will get massacred.
idk. please elucidate and explain more about *enhanced feature to mitigate slip on MT4 
thx.
THANKS
ps presumably the same clients therefore logically lost over ($21M * 12/15)? in negative slippage? or thereabouts…
There are only two protective measures of which I am aware you can use to protect your capital against a sudden illiquid move like the Jan 15th swiss move.
The first and most important is position sizing. Winton Capital Management (one of the world’s largest CTA firms) lost less than 1% in that move. What does that tell us? That tells us that a 19% move against them in the franc moved their total equity by less than 1%. We should take a good lesson from that. When we trade a pair, we should trade a position size like that. Someone with a $10,000 account should not be putting on a $10,000 position in one pair. Why? Because a 20% move against them will lower their account balance by 20%. In a $10,000 account, a $1,000 position would turn a 20% move into something like a 2% change in the account balance.
So rather than simply measuring the distance between one’s entry and stop and sizing the position to risk one or two percent from entry to stop, we should also prevent our position size from being so big as to turn a sudden illiquid 20% slip into a negative account balance tragedy.
The other measure we should take is to deposit only a limited amount of our trading capital with our dealer. If indeed a sudden disaster should strike we should have most of our capital safely in a bank account at home. If our dealer account goes negative, we are much more likely to get negative account forgiveness than most of our fine print would have us think and a testament to that was written in the wave of forgiveness that went through the retail fx industry last January. This measure will also protect you against the bankruptcy of your dealer, be it the result of exogenous events or an internal scandal.
-Adrian
Hi Adrian and thanks for the good advice.
just thinking out loud but a management firm is not gonna pay spreads etc quite like most of the rest of us do, but i get the point.
more thinking out loud, in the example given, a stop loss of 50 pips might have been set at 1.050360 on a buy. the next nanno second you are closed at 1.049972… so your expected loss of 50 pips turns into 437, say 8 times more than expected… and this may not even be a worst case senario. so, say, can your strategy and balance stand maybe 10 losses in a row? or you trade one tenth of one percent and maintain a low balance? ten accounts with ten different brokers maybe, lol. idk. just i have seen nice safe banks crash let alone brokers or one of my demo accounts. gaps dont have to be just at news or swaps that can be dodged. idk, i am wondering how anyone makes money without getting killed sooner or later even with a good strategy. or i must manage to hedge everything and just work off the split? which is surely much harder to be immediately profitable? the loss on a buy gbpusd offset by a sell on eurusd, say? not so much fun if you are guaranteed one win and one loose plus 2 spreads to pay. idk. thanks.
in a 10k account a 1k loss risked would turn into 8 times as much, or an 80 percent loss on just that gbpusd trade example that would kill the account before even margin call kicked in. idk, my bad maths, lol.
I think slippage is mostly seen during news time so you either avoid trading at that time or you will select wider stop loss for better control of your position.