Last Updated on: 14th February 2021, 12:20 pm
Asymmetric slippage is when your broker handles orders differently according to whether the market has moved in your favor or against you.
Slippage is the difference between the expected price of a trade and the price the trade is actually executed.
Markets can move in milliseconds, meaning the price you click to trade on may have changed by the time your order reaches your broker.
Slippage can occur for a number of different reasons and can work for and against a trader.
Asymmetric slippage involves a broker passing negative price movements to you but seeking to capture positive slippage itself by only giving you the original quoted price where a positive movement for the broker has occurred in the intervening time between a quote being provided and the execution of the order.
Asymmetric price slippage is different in the sense that traders are prevented from taking advantage of price improvements, with slippage only occurring when it works against the trade.
This practice is illegal. Firms that fail to pass on improvements in execution prices are in breach of both U.S. and European regulation.
Brokers that aren’t regulated in jurisdictions with a tough regulatory agency may be more inclined to not pass on positive slippage to traders.
Vincent Nyagaka is a Professional Trader, Analyst & Author. He has been actively engaged in market analysis for the past 7 years. He has a monthly readership of 100,000+ traders and has taught over 1,000 students since 2014. Vincent is also an experienced instructor and public speaker. Check out Vincent’s Professional Trading Course here.