Trading in financial markets always involves risk, and one of the most misunderstood risks is slippage. For traders in the UAE, slippage can have a direct impact on profitability, especially when markets become volatile. Whether you trade forex, stocks, commodities, or cryptocurrencies, slippage can change your entry and exit prices without warning.
This article explains what slippage is, why market volatility increases slippage risk, how it affects UAE traders, and what practical steps you can take to manage it effectively.
What Is Slippage in Trading?
Slippage happens when a trade is executed at a different price than the one you requested. This usually occurs when prices move quickly and the market cannot fill your order at the expected price.
For example, you place a buy order at a specific price, but the market moves before your order is executed. As a result, the trade is filled at a higher or lower price. This difference is known as slippage.
Slippage can work in two ways:
- Negative slippage, where the execution price is worse
- Positive slippage, where the execution price is better
Most traders focus on managing negative slippage because it increases costs and risk.
Why Market Volatility Increases Slippage
Market volatility refers to how fast and how many prices move in a short period of time. When volatility is high, prices can jump or drop within seconds.
During volatile conditions:
- Orders are filled more slowly
- Price gaps appear
- Liquidity may temporarily drop
- Bid and ask prices change rapidly
These conditions make it harder for brokers to execute trades at exact prices, increasing the chance of slippage.
Volatility Events That Cause Slippage in the UAE
Traders in the UAE mostly trade global markets, which are affected by international news and events.
Common volatility triggers include:
- US economic data releases
- Interest rate decisions
- Oil price movements
- Geopolitical tensions
- Earnings reports
- Crypto market announcements
Because UAE traders operate across different time zones, they are often active during high-impact global sessions, increasing slippage risk.
How Slippage Affects Entry Prices
Slippage at entry means your trade opens at a worse price than planned. This immediately increases risk because your stop-loss is now closer, or your potential profit is reduced.
Effects of entry slippage:
- Higher cost per trade
- Reduced reward-to-risk ratio
- Faster stop-loss hits
- Lower trade accuracy
Even small slippage can affect overall performance when trading frequently.
How Slippage Affects Exit Prices
Slippage at exit can be even more damaging. When a stop-loss is triggered during high volatility, the market may skip the stop level and execute at a much worse price.
This can lead to:
- Larger losses than expected
- Risk management failure
- Emotional stress
- Account drawdowns
Exit slippage is common during sharp market moves or sudden news events.
Slippage in Different Markets Traded in the UAE
Forex Markets
Major currency pairs usually have high liquidity, but slippage can still occur during news releases or session openings. Exotic pairs are more vulnerable to slippage due to lower trading volume.
Stock Markets
Stock slippage often happens at market open, during earnings announcements, or in low-volume stocks. Price gaps between sessions are common.
Commodity Markets
Oil and gold are popular in the UAE. Slippage increases during inventory reports, OPEC announcements, and global economic events.
Cryptocurrency Markets
Crypto markets are highly volatile and operate 24/7. Slippage is common during sudden price spikes, liquidations, and low-liquidity periods.
The Hidden Cost of Slippage
Many traders underestimate how much slippage affects long-term performance. Over time, frequent slippage can significantly reduce profits.
Hidden costs include:
- Increased transaction expenses
- Inconsistent trade results
- Difficulty maintaining strategy accuracy
- Lower overall account growth
Managing slippage is just as important as managing spreads or commissions.
How UAE Traders Can Reduce Slippage Risk
Trade During High-Liquidity Sessions
Trading during active market hours, such as the London and New York sessions, usually offers better execution.
Use Limit Orders Instead of Market Orders
Limit orders give you control over the execution price and help prevent unexpected slippage.
Avoid Trading During High-Impact News
Waiting until volatility settles can reduce slippage and improve execution quality.
Control Position Size
Large orders are more likely to experience slippage. Proper position sizing helps reduce this risk.
Choose a Reliable Broker
A broker with fast execution, strong infrastructure, and transparent execution policies can help reduce slippage.
Is Slippage Completely Avoidable?
No. Slippage is a natural part of trading and cannot be fully eliminated. However, it can be managed and reduced with the right approach.
Accepting slippage as part of trading helps traders plan realistically and avoid emotional decisions.
Common Mistakes That Increase Slippage Risk
Some mistakes include:
- Trading during extreme volatility
- Using market orders without planning
- Overleveraging positions
- Ignoring liquidity conditions
Avoiding these mistakes improves consistency and protects capital.
Bottom Line
Slippage is an unavoidable risk in trading, especially during volatile market conditions. For UAE traders who operate in global markets, understanding how volatility affects entry and exit prices is essential. While slippage cannot be eliminated, it can be controlled through better timing, smart order types, proper risk management, and disciplined trading behavior. Managing slippage effectively leads to more predictable results and long-term trading stability.
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