Slippage occurs when there is a difference between the expected price of a trade and the actual price at which the trade is executed. This can happen during periods of high volatility when market conditions change rapidly, or when there is low liquidity in the market.

For example, if you place a buy order at a specific price but the market moves before your order is filled, you may end up buying at a higher price than anticipated. Conversely, when selling, you might receive a lower price than expected.

Slippage can be categorized as positive or negative. Positive slippage occurs when you get a better price than expected, while negative slippage results in a worse price. Understanding slippage is essential for effective trading, as it can impact your overall trading performance and strategy.