Hi folks,
Can anyone guide me how to stay away from slippage in the case of a major news event? I had a set this sell stop order, shorting EUR at 1.3235, but when I saw it had entered only at 1.3219. Holy crap! This ruined my whole setup. I have a demo account with FXCM. Is anyone among you also facing the same problem? Please guide.
Slippage is always a risk during high volatility markets like those around news releases. You either have to avoid them or hope they balance out in the long run. You can use limit orders as an alternative, but that runs the risk of missing a trade entirely.
well, you can’t avoid slippage, but you can reduce the risk by setting the account with the broker that you’d have low latency with. You can also speed-up your computer or improve your internet connection, it might help as well. One more thing is to place the pending order at the specific level.
you can use trading software that lets you determine the maximum amount of slippage-pips
[QUOTE=“Ursus;514980”]well, you can’t avoid slippage, but you can reduce the risk by setting the account with the broker that you’d have low latency with. You can also speed-up your computer or improve your internet connection, it might help as well. One more thing is to place the pending order at the specific level.[/QUOTE]
Latency is a good point. If you want to run mt4 on a vps, make sure it is close to your brokers servers. Some forex vps providers have a ping test to check latency to different brokers.
Hi Ajonedesire,
Welcome to the forum 
It’s good you’re getting this experience on a demo account. It’s important to realize that the risk of slippage is greatest during major news events. That’s because your orders can only be filled at a price that’s currently available in the market. If despite knowing these risks, you still want to trade during major news events, there are some precautions you can take to help minimize your slippage.
For example, you said you used a sell stop order to open a short position in EUR/USD during a news event. The problem with this is that stop orders become market orders when triggered and will get filled at whatever is the best price available at the time. Depending on how much the price moves during the news announcement, the price you get filled at on such an order could end up being worse than you expected.
Instead, try opening trades using the “market range” feature on our Trading Station platform. A market range order type allows you to control the amount of slippage your order can receive when it executes allowing for price certainty (see image below).
A market range of “X” pips assures that all or part of your order will be filled within a “X” pip range of the current market price (“X” pips above or “X” pips below) if liquidity is available.
Market Range Example: Assume that you place a market order to sell EUR/USD at 1.3235 with a market range of five pips. When the order triggers for execution, one of the following three scenarios can occur:
SCENARIO 1:
The market has already moved below your 5-pip market range and is trading at 1.3219. The execution halts and the order is automatically canceled.
SCENARIO 2:
The market is trading within your 5-pip market range at 1.3233. Your order executes and is filled at 1.3233.
Another thing to keep in mind is that slippage can be positive or negative. Positive slippage is when your order gets filled at a better price. This is also known as a price improvement. The stats below show that with FXCM, clients are just as likely to receive price improvements as they are to receive negative slippage.
It’s just that price improvements are more likely to occur with limit orders, while negative slippage is more likely to occur with stop orders, because of the momentum in the market. The lesson is to use limit orders whenever possible to open and close orders.
If you have any further questions, feel free to ask me in the Broker Aid Station.
Jason
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Think simple. Don’t trade during news times. There may be even higher slippage
And you are very lucky as this happened to your demo account.
I agree with you. Slippage shows lack of liquidity by your broker or at least the inability to get your order to market fast enough. Slippage of 16 pips on EURUSD is pathetic regardless of what is going on. I trade and at my broker I have never faced any of this. It shows a poor connected broker who can’t fill orders if you get slippage like that. Stay away from brokers who can’t fill your orders is my recommendation.
That may be the best advice for those looking to minimize slippage as much as possible.
We have seen news events become more and more volatile as speculation increases about Fed tapering. This is a marked difference from the low volatility we saw in 2012. There is so much riding on the outcome of economic reports that it creates uncertainty and ultimately risk reduction by liquidity providers around these news events. And how do liquidity providers reduce risk? By managing their own risk via spreads and making it more costly for you to enter a trade.
For anyone trading during news events and particularly during NFP tomorrow, please be careful due to market volatility.
well, there is always an option to place the pending order, where you won’t have slippage at any case.
Slippage prevents FX brokers from being robbed at news time by Entry orders.
I think that some brokers apply slippage only to certain clients but not to all clients. And some brokers do not apply slippage to Stop loss orders.
… so you can make your choice.
Slippage is key concept that should be included in your own attitude towards risk management. It’s an integral part of trading and moaning about “these” and “those” spreads widening during news is normal practice. As Jason said from FXCM, there is increased speculation these days on news events, more so than previous years.
Also remember the account which you are using to trade with. A true direct market access account or ENC should narrow the spread for you and reduce slippage caused by this. But as most retail traders are on non-true ECN accounts (even if your broker says otherwise this will be the case, so don’t be fooled) they will see wider spreads. Any and all brokers have to widen there spreads to cover the markets underlying increase in spread - the degree of this “increase” or “spike” in spread is down to the brokers own risk policy.
Don’t want to be put off from Spread Spikes?
- Avoid predated news events which are known to be risky/volatile
- Trade these risky news events as usual, but reduce risk and widen your own levels to balance out spread spikes.
this was a pending order. not ordering at market price!
Jezzode,
Thanks for your input. Can you suggest good ECN brokers?
It is a very serious problem. I had faced this problem twice this week and for the first time also. I have even covered by profits with protective stops above BE but still the price gaped down and my positions was closed in loss.
Most of the main brokers on the market offer an ECN account with platforms from Currenex or JForex which is a white label account from Dukascopy Bank who offer institutional level pricing. I also know Alpari use Currenex on there ECN account. In both cases the minimal deposit is around $20,000 (USD). Some brokers on the market state that you can open an ECN account with as little as a few hundred dollars - this is just a play on words and not a true ECN account as you will see you will not have full access to ECN functions.
Once you look into Jforex or Currenex you will see the difference - for one it’s not as user friendly and these accounts are aimed at commercial traders who trade much larger volumes, or retail traders who have very deep pockets.
At the end of the day, if slippage is the difference between your trading edge existing and not existing then I would carefully consider your options as this should not be the deciding factor on weather to trade or not. Even on non ECN accounts with a good reputable broker the slippage should be no more than a pip on two on the most liquid pairs during high volume trading hours when news is out.
Please tell me which broker you use. I would love to have broker with only 1-2 pip slippage on EUR/USD on NFP. Heck, I dont care if slippage is 5-10pips as I will take that into consideration.
However…does it mean that the spread will increase to 20pips?
Many thanks
Use EA robot to trade, you can set there the maximum slippage allowed and if the BID/ASK just passed your limit in wont enter onto that trade.
Sometimes I feel like I am the only one who does not have an issue with slippage. I don’t trade news events, but I have pending order open prior to them and even when the price spikes my order is filled as I entered it, in very rare cases one or two pips away from it. Maybe you guys should look into a different broker.
Can you tell us with broker you use?