Can someone explain the difference between slippage and spread on the ES

S

shots fired

I have read definitions for both "slippage" and "spread" on Investopedia, but still do not understand it. I think spread is very complicated. But perhaps I do understand what slippage means. My understanding of slippage is: when I place a market order for 1 contract in hopes of getting filled at, say,
1500, the market order actually fills at 1501. This is slippage? If so, it seems slippage happens each and every time I place a market order for an ES contract. It never gets filled where I want it to. On the other hand, I have given up (almost) on understanding "spread". It seems to be a very complicated concept which I am still a long ways off from grasping.
 
If you enter a market order (or a marketable limit order), and you get a complete fill at the current best bid oder offer, you are paying only the spread.

If your order cannot be filled completely at the current best bid or offer (because it is too large) and/or the market is moving away from you before the order gets filled, that's called slippage.

With a market order or marketable limit order, you are always paying the spread.

On the other hand, the amount of slippage depends on
a) size of your order vs. liquidity of the market and
b) execution speed vs. price velocity
 
Quote from shots fired:

I have read definitions for both "slippage" and "spread" on Investopedia, but still do not understand it. I think spread is very complicated. But perhaps I do understand what slippage means. My understanding of slippage is: when I place a market order for 1 contract in hopes of getting filled at, say,
1500, the market order actually fills at 1501. This is slippage? If so, it seems slippage happens each and every time I place a market order for an ES contract. It never gets filled where I want it to. On the other hand, I have given up (almost) on understanding "spread". It seems to be a very complicated concept which I am still a long ways off from grasping.
More...
the spread on es is almost always .25

so you can buy at 1500.25 or you can sell at 1500

you can buy the bid or sell the ask at a limit, but there is no gurantee when you get filled at 1500 that the bid won't move to 1499.75, but the spread on es (the difference between the bid and the ask) is almost always .25. That's why they say it is very liquid, or very tight.

slippage is what happens usually for most traders on a stop which gets executed as a market order when the trigger gets hit, in a fast market (which is often when all the stops get hit) it can move past your trigger before it gets filled.
 
Quote from shots fired:


1500, the market order actually fills at 1501. This is slippage? If so, it seems slippage happens each and every time I place a market order for an ES contract. It never gets filled where I want it to.
More...


It sounds strange that you suffer slippage when trading 1 lot ES. Are you sure you have real time quotes ?

There are many kinds of spreads, basically it's when you are trading futures contracts of different expirations or options of different strikes and/or expirations. You will get quite a bit of info in the options forum and all over the internet - have a look in other websites besides Investopedia.
 
I think in fact he is not suffering from slippage but simply paying the spread. Those that trade ES in small (or even medium) size only during RTH suffer very little slippage over the course of the average month. If you are scalping for a few ticks maybe it matters (although I doubt it) but otherwise simply limit your trading to RTH and do not concern yourself with it.

Quote from luisHK:

It sounds strange that you suffer slippage when trading 1 lot ES. Are you sure you have real time quotes ?

There are many kinds of spreads, basically it's when you are trading futures contracts of different expirations or options of different strikes and/or expirations. You will get quite a bit of info in the options forum and all over the internet - have a look in other websites besides Investopedia.
More...
 
For a sake of new traders who might read this thread, I just wanted to comment that the word "spread" is just a word used by traders to mean "difference" and often thrown around cavalierly. LuisHK gave some nice examples of the different kinds of "spreads" traders might refer to.
 
Maybe I was exaggerating when I said the market price was 1500, but I got filled at 1501. Maybe, in fact, I got filled at 1500.25. I lost quite a bit of money trading the ES, and so I haven't traded in about 6 months. I haven't even looked at the ES until two weeks ago. I intend to study and practice for the next couple of years before trying it again. But from what I recall, what annoyed me was as soon as I submitted a market order, it seemed it never got filled where the current price was. Instead, I always started out in the hole, so to speak, a tick or two. So I'm thinking now that this was the SPREAD.
I think that clears it up quite nicely in my head. I had no idea what the spread was, and now I do. Slippage is nothing more than not getting filled at your desired price because of a fast moving market. So yeah, I think I gets it now. Thanks!
 
Quote from shots fired:

Maybe I was exaggerating when I said the market price was 1500, but I got filled at 1501. Maybe, in fact, I got filled at 1500.25. I lost quite a bit of money trading the ES, and so I haven't traded in about 6 months. I haven't even looked at the ES until two weeks ago. I intend to study and practice for the next couple of years before trying it again. But from what I recall, what annoyed me was as soon as I submitted a market order, it seemed it never got filled where the current price was. Instead, I always started out in the hole, so to speak, a tick or two. So I'm thinking now that this was the SPREAD.
I think that clears it up quite nicely in my head. I had no idea what the spread was, and now I do. Slippage is nothing more than not getting filled at your desired price because of a fast moving market. So yeah, I think I gets it now. Thanks!
More...
yes, you have it, if an immediate fill is not required, you can enter a limit to buy the bid or sell the ask, in which case you will start many if not most trades up one tick.
 
Quote from volente_00:

There can be massive slippage if the spread is to large for your size once you assume a position in the underlying
More...


Now, Thats what I'm talkin' about !
 
You must log in or register to reply here.
Back
Top