Slippage
Slippage is the difference between the price you expect and the price you actually get when executing.
Definition
Slippage is the gap between a reference price (often mid) and your actual execution price. Slippage is common when liquidity is low or when you cross a wide bid ask spread.
Why it matters
Slippage reduces realized edge. It can dominate outcomes in thin markets, even if your predicted probability is reasonable.
How it connects
• Slippage is one component behind effective spread.
• Slippage increases when order book depth is low.
Common pitfalls
Assuming fills at quoted prices: Quoted bid and ask can vanish.
Ignoring size: Larger orders often face worse slippage.