By BrokerAnalysis.com Research Desk — AI-assisted draft, reviewed and approved by our editorial team before publishing.

Understanding Slippage: Why News Events Cause Price Gaps and Missed Fills

Short Answer

Slippage occurs when a trade is executed at a price different from the one requested by the trader. During high-impact news events, this phenomenon intensifies because markets experience extreme volatility, rapid price movements, and a significant reduction in available liquidity, making it difficult for brokers to match orders at the exact requested price.

The Details

To grasp why news events are a prime catalyst for slippage, we first need to understand the mechanics of slippage itself and then examine how market conditions drastically change when major economic data is released.

What is Slippage?

Slippage is the difference between the expected price of a trade and the price at which the trade is actually executed. It can be positive or negative:

• Negative Slippage: Your buy order is filled at a higher price, or your sell order is filled at a lower price than intended. This is detrimental to your trade.
• Positive Slippage: Your buy order is filled at a lower price, or your sell order is filled at a higher price than intended. This is beneficial, though less common during news events.

Slippage is most noticeable with market orders, which instruct your broker to execute a trade immediately at the best available price. Limit orders, conversely, will only execute at your specified price or better, meaning they might not fill at all if the market moves past your limit.

Market Dynamics During News Events

When a high-impact economic report is released – such as Non-Farm Payrolls (NFP), interest rate decisions, or GDP figures – several critical market conditions converge to create an environment ripe for slippage:

1. Extreme Volatility Spike

News releases often contain unexpected information that can dramatically shift market sentiment. This leads to a sudden surge in buying and selling pressure, causing prices to move very rapidly and unpredictably. A currency pair might jump or drop dozens of pips in a matter of seconds, making it incredibly challenging for any system to guarantee execution at a static price.

2. Liquidity Drain and Spread Widening

This is perhaps the most significant factor. Market liquidity refers to the ease with which an asset can be bought or sold without affecting its price. During major news events, many large liquidity providers (banks, institutional traders) temporarily pull back their orders or significantly widen their bid-ask spreads. They do this to protect themselves from the extreme volatility and uncertainty.

• Reduced Depth: With fewer participants willing to quote prices, the 'depth' of the market (the volume available at each price level) diminishes.
• Wider Spreads: The gap between the best available buy (bid) price and sell (ask) price expands dramatically. For example, a pair that typically has a spread of 0.5 pips might suddenly see it widen to 5, 10, or even 20+ pips.

When you place a market order during such conditions, your broker's system must find a counterparty for your trade. If the volume at your requested price is insufficient or has already been consumed by other orders, your order will 'slip' to the next available price level in the order book, which could be several pips away due to the wide spreads and reduced liquidity. Even brokers known for competitive spreads, such as Exness (offering EUR/USD from 0.0 pips on Raw accounts), FP Markets (EUR/USD from 0.0 pips on Raw accounts), or BlackBull Markets (EUR/USD from 0.0 pips on ECN Prime accounts), will experience significant spread widening during these volatile periods, as it's a market-wide phenomenon.

3. Execution Speed and Network Latency

While modern trading systems are incredibly fast, there's always a minuscule delay between when you click 'buy' or 'sell' and when your order is received and processed by the broker and then by the liquidity providers. During news events, prices can move so quickly that even these milliseconds of latency can mean the difference between your requested price and the actual execution price.

Example Scenario

Imagine EUR/USD is trading at 1.0800 / 1.0801 (Bid/Ask). A major interest rate announcement is released, and the market reacts sharply. You place a market buy order for 1 standard lot at 1.0801. However, due to the sudden influx of orders and liquidity drying up, the best available ask price instantly jumps to 1.0805. Your order, being a market order, is filled at 1.0805, resulting in 4 pips of negative slippage. If you had a stop-loss at 1.0790, and the price gapped down past it to 1.0780, your stop-loss would also suffer slippage and be executed at 1.0780.

Common Mistakes

• Relying solely on Market Orders: Using market orders during news without understanding the high probability of slippage can lead to unexpected entry or exit prices.
• Ignoring Economic Calendars: Trading during high-impact news releases without awareness is a recipe for surprise slippage and volatility.
• Over-Leveraging: High leverage amplifies the impact of slippage, turning a small price difference into a significant percentage loss on your account.
• Expecting Zero Slippage: No broker can guarantee zero slippage during extreme market conditions. It's an inherent market risk, not a broker failing.
• Placing Stop-Loss Orders Too Close: Stops placed very close to the entry price are highly susceptible to being triggered by news-induced volatility and then suffering slippage.

How to Verify This Yourself

You don't have to take anyone's word for it. You can observe slippage and its causes firsthand:

• Monitor Economic Calendars: Use a reliable economic calendar (available on most broker websites or financial news portals) to identify upcoming high-impact news events.
• Observe Live Spreads: Open a demo account with a broker and watch the live bid/ask spreads on major currency pairs (e.g., EUR/USD, GBP/USD) just before, during, and after a significant news release. You will see the spreads widen dramatically.
• Review Broker Execution Policies: Most reputable brokers publish their execution policies or order handling procedures in their legal documents (e.g., Product Disclosure Statement, Terms & Conditions). These documents often explain how slippage is handled.
• Test with Small Trades: If you have a live account, consider placing very small, low-risk market orders during minor news events to experience execution firsthand and review your trade reports for any price differences.

Bottom Line

Slippage is an unavoidable aspect of trading, particularly during high-impact news events. It's a direct consequence of extreme volatility, reduced liquidity, and rapidly widening spreads. Understanding these dynamics is crucial for any trader. While no broker can eliminate slippage entirely during such periods, being aware of its causes allows you to implement better risk management strategies, such as using limit orders where appropriate, avoiding trading during the most volatile moments of news releases, and always accounting for potential wider spreads and unexpected fills in your trade planning.

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Related Reading on BrokerAnalysis

• Exness Review
• FP Markets Review
• BlackBull Markets Review
• Best Forex Brokers
• Compare Forex Brokers
• Forex Economic Calendar
• Forex News Trading Guide
• Interest Rates and Forex
• Trading Risk Management
• Forex Market Analysis Guide
• How to Verify Broker License

Sources & Further Reading

• FCA Financial Services Register (UK)
• CySEC Regulated Entities Register (Cyprus)
• ASIC Connect Professional Registers (Australia)
• NFA BASIC Broker Check (US)
• FSCA Regulated Entities Search (South Africa)