What is slippage?
Slippage is the gap between the price requested and the price actually obtained on execution. On a prop firm account it depends on the company's infrastructure, and can trigger a drawdown breach.
It is the hardest cost to anticipate, and the one that sometimes turns a controlled loss into elimination.
When it happens
Three situations mainly trigger it.
Economic announcements: the price moves several pips in a fraction of a second, and the order fills at the first available price, sometimes far from the level intended.
Session opens and gaps: no price exists between the close and the reopen, so a stop placed in that interval fills at the opening price.
Low liquidity periods: the end of the Asian session, public holidays, when the order book is thin.
What is specific to prop firms
A stop-loss is not a price guarantee: it is an order triggered at a level and filled at the first available price. On a personal account, adverse slippage costs more than planned. On a prop firm account, it can push you through the drawdown floor and close the account for good.
The defence comes down to one rule: never size a position so that the drawdown would be reached exactly at the stop. Leave enough room to absorb an execution gap, particularly if you hold through an announcement or overnight.
Positive slippage
It exists and works in your favour: an order filled at a better price than requested. A firm that applies negative slippage while never granting the positive is configuring its execution asymmetrically — a signal, hard to verify but sometimes documented in trader reports.
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Related terms
- Breach A breach is the violation of a risk rule that triggers a sanction on the account. Depending on the firm and the rule involved, it suspends the trading day, cancels a payout, or closes the account for good.
- News trading News trading means taking positions around major economic announcements. Most prop firms restrict it with a prohibited window, generally two to five minutes before and after the release.
- Simulated account A simulated account reproduces market conditions without orders reaching a real market. Most prop firm accounts, including those held after passing the challenge, run on this model.
- Spread The spread is the gap between an instrument's buy and sell price. On a prop firm account it comes from the firm's own configuration, and it is a recurring cost traders routinely underestimate.