advanced · TRADING LEARNING GUIDE
Spread and slippage
What is this concept?
Spread is the difference between ask and bid. Slippage is the difference between a reference execution price and actual fill. Fees and market impact add further costs.
Step by step
Specify order type, size and execution reference. Record both sides of the quote and actual fills. Stress wider spreads and lower liquidity.
From observation to decision
Record the instrument, venue, session and timeframe. Classify the observation using the definition, then write at least one alternative interpretation. Decide what evidence would invalidate your idea before entry. Mark missing information explicitly. Examples are hypothetical. Collect paper observations, including failures. Include fees, spread, slippage and timestamp alignment when measuring outcomes. Recognizing a chart shape and establishing a profitable trading rule are separate tasks.
Worked example
Bid 100, ask 100.2 imply a 0.2 spread: crossing both sides for 100 units costs 20 before fees. A buy fill at 100.4 against ask 100.2 adds 0.2 adverse slippage.
Common mistakes and limits
Avoid testing all trades at a single chart price, assuming unlimited fills or ignoring size-dependent impact.
Practice
Recalculate a paper strategy with normal and doubled spreads plus adverse slippage.
Resources and further reading
These sources explain definitions and underlying mechanics. Worked examples are original illustrations; a source does not establish the profitability of a custom pattern.
Further reading / foundational context. Worked examples on this page are original illustrations, not source performance claims.
Further reading / foundational context. Worked examples on this page are original illustrations, not source performance claims.