Slippage is a concern in Forex trading. It is very difficult to completely avoid slippage, and it occurs regardless of the Forex broker. In order to reduce trading costs, it is important to choose a Forex broker with a small slippage frequency and width.
What is slippage
Slippage is the discrepancy between the order price and the execution price in FX trading. For example, if you place a buy order for USD/JPY at USD 1 = JPY 100.00 and the actual contracted price is USD 1 = 100.02, there is an error of 2 pips.
Why Slippage Occurs
There are three reasons why slippage occurs in FX trading.
Communication speed is slow
In the exchange market where the price fluctuates by the second, a delay of a few seconds is fatal. A slow internet connection means that it takes time for the order to reach the Forex broker’s server.
When the demand for a particular currency rises due to economic indicators or remarks by dignitaries, orders for that currency rush, causing an imbalance between buyers and sellers, and buyers place orders at unfavorable prices in order to execute contracts. I have to accept it. Furthermore, since the server of the Forex broker is burdened, slippage will occur if the order cannot be processed smoothly.
Forex trader operation
There are two major types of Forex traders: the “trading method in which the trader and the Forex trader trade directly (DD method)” and the “trading method in which the trader places an order in the market without going through the Forex trader (NDD method)”. In the DD method, it is practically possible to move maliciously and intentionally. There is an image that slippage often occurs in Forex traders who take this method, and if it is a malicious trader, it is possible to intentionally generate slippage that is disadvantageous to traders and steal customer profits.
Slippage at XM Trading
XM’s official position is that “slippage is almost non-existent”. Be careful when announcing economic news, etc., as a sudden rise or fall in market prices can cause major changes.
In order to avoid slippage, it is important to “use a trader with high contract power” and “do not trade during slippery hours”. XM Trading has a very high execution power, so you can trade with peace of mind. Especially during high leverage trading, if slippage occurs, it can lead to a big loss. So use a company you can trust. XM is one of the forex brokers with the least slippage.
XM adopts the NDD method
Since XM uses the NDD method, a trading method in which traders’ orders flow directly into the market, it is impossible for XM to maliciously and intentionally change the slippage. Therefore, traders can trade with confidence.
XM has high execution power, with 99.35% of all orders filled in less than 1 second. Because of this background, slippage is less likely to occur. In addition, there is no order rejection at XM, so you can trade with confidence without worrying about unsuccessful orders.
Unable to set allowable slippage width
XM does not have the ability to set the allowable slippage, so it is useless for XM users to set the allowable slippage. However, if you are using a broker who can set the allowable slippage width, you can set the allowable slippage width in MT4/MT5.
Do not trade during economic or political volatility
The times when slippage is likely to occur may be “when the market changes suddenly” and “when the liquidity of the transaction is low”, and these are common contents not only for XM but also for all FX traders. Therefore, it is important not to trade when there are important economic indicators or major political movements. I don’t know how the market will move in one direction due to the announcement of important economic indicators or remarks by important people.