Hello to all,
In the “STP Execution” section of Kindergarten, I encountered this sentence: “But while the possibility of slippage for the broker is eliminated, the possibility for slippage for YOU (the customer) has increased.” Could someone please explain to me how come there is slippage with the broker since it locked the trade with LP already. Shouldn’t the price it displays be better ‘controlled’, and the spread more consistent ? Thanks
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Hi, it is a technical problem and STP risk management. Check this example, I am a broker, you are my customer and Tom is my LP. When you want to open a transaction, you have to send me a request:
Hey Greg, I want to buy EUR/USD 1 Lot at 1,06753.
Then I am asking Tom:
Hi Tom, my client wants to buy EUR/USD 1 Lot at 1,06753
Tom answer:
Sure, I will take this transaction.
My answer to you:
Not a problem, your transaction is on the market 
During our conversation, the price could change for example to 1,06763. This is the slippage, execute your transaction in different price
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Thank you very much for clarifying things up. I thought that once it’s locked in, it cannot change.
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Slippage can occur due to several reasons. Your local PC hardware may be insufficient, there may be high latency between your connection and the broker server, or there could be high latency between the broker server and the liquidity provider. Additionally, slippage can occur due to market gaps.
You can try to minimize all types of slippage by choosing the best broker, ensuring good internet connectivity close to the broker server, and having good hardware resources. However, slippage due to market gaps cannot be avoided under any circumstances. Whether the broker is regulated, a market maker, ECN, or STP, slippage may still occur if there is a gap in the market.
Market gaps usually occur during high-impact news events or during market closure (Friday) and opening (Monday).
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