When you place a trade on the ASX or any global exchange, you expect to buy or sell at a certain price. However, in the moments before your order is filled, the price can shift—sometimes subtly, sometimes dramatically. This difference between the expected and actual execution price is known as slippage. For Australian investors in 2026, understanding slippage is essential, as evolving technology and market structures continue to shape how trades are executed.
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What Is Slippage?
Slippage occurs when a trade is executed at a price different from the one you anticipated. This can happen for both buy and sell orders, and the impact can be either positive or negative. Positive slippage means you receive a better price than expected, but most investors are more concerned about negative slippage—paying more to buy or receiving less when selling than planned.
Why Does Slippage Happen?
Several factors contribute to slippage:
- Market volatility: Rapid price movements, often triggered by news or economic events, can cause prices to change in the milliseconds between order placement and execution.
- Liquidity: In markets or securities with fewer buyers and sellers, there may not be enough orders at your desired price, causing your trade to fill at less favourable prices.
- Order size: Large orders, especially in less-liquid stocks or outside peak trading hours, can move the market and increase the chance of slippage.
For example, if you place an order to buy a large number of shares in a small-cap ASX company at $1.00 per share, but only a portion of your order can be filled at that price, the remainder may be executed at higher prices as the available supply at $1.00 is exhausted.
How Slippage Is Changing in 2026
The Australian trading landscape is evolving, and so is the nature of slippage. Several trends are shaping how slippage affects investors this year:
Increased Use of Algorithms
Algorithmic trading continues to grow, with automated systems now handling a significant share of daily trading volume. These algorithms can react to market news and order flow in fractions of a second, sometimes causing prices to move rapidly and increasing the likelihood of slippage during volatile periods.
Regulatory Developments
Regulators are placing greater emphasis on the quality of trade execution. Recent guidelines require brokers to focus on achieving the best possible outcomes for clients, including greater transparency around execution prices and slippage. This means investors have more information to compare broker performance and understand how their trades are being handled.
New Asset Classes and Trading Venues
The rise of cryptocurrencies and other digital assets has introduced new forms of slippage risk. On decentralised exchanges, for example, liquidity can be limited, and prices can shift quickly as trades are executed. Even in traditional markets, the use of alternative trading venues like dark pools—private exchanges for large trades—can affect how and where slippage occurs.
Trading Platforms and Tools
Many trading platforms now offer features such as slippage tolerance settings, allowing investors to specify the maximum price difference they are willing to accept. While this gives investors more control, it also requires a better understanding of how slippage works and the potential risks involved.
Practical Strategies to Reduce Slippage
While slippage cannot be eliminated entirely, there are several steps Australian investors can take to minimise its impact:
Use Limit Orders
A limit order instructs your broker to buy or sell only at a specific price or better. This protects you from unexpected price changes, especially in volatile markets. However, there is a trade-off: your order may not be filled if the market does not reach your specified price.
Trade During High-Liquidity Periods
Liquidity is typically highest around the market open and close. Placing trades during these times can help ensure there are enough buyers and sellers at each price level, reducing the risk of slippage. Avoiding large trades during quiet periods, such as midday or after-hours, can also help.
Break Up Large Orders
If you need to trade a significant amount, consider splitting your order into smaller parts. This can help prevent your order from moving the market and causing additional slippage. Some brokers offer algorithms that automatically break up large orders to optimise execution.
Set Slippage Tolerance (Where Available)
On platforms that support it, you can set a maximum slippage tolerance. This is common in cryptocurrency trading and is becoming more available in equities. If the market moves beyond your specified tolerance, your order will not be filled, helping you avoid larger-than-expected losses.
Monitor Broker Execution Quality
With increased transparency requirements, brokers now provide more information about how trades are executed. Reviewing these statistics can help you assess whether your broker is consistently achieving fair prices. If you notice persistent slippage, it may be worth comparing other brokers or discussing execution practices with your provider.
Real-World Example
Consider an investor in Sydney who regularly buys exchange-traded funds (ETFs). They notice that trades placed during the middle of the trading day often result in less favourable prices compared to trades executed at the market open. Over time, even small differences in execution price can add up, affecting overall returns. By adjusting their trading habits to focus on periods of higher liquidity, the investor can reduce the impact of slippage on their portfolio.
The Bottom Line
Slippage is an often-overlooked cost that can affect every investor, from beginners to professionals. In 2026, with rapid technological change and evolving market structures, being aware of slippage and taking steps to manage it is more important than ever. By understanding the causes of slippage, staying informed about regulatory changes, and using practical trading strategies, Australian investors can help protect their investment returns.
Frequently Asked Questions
What is slippage in trading?
Slippage is the difference between the expected price of a trade and the actual price at which it is executed. It can be positive or negative, but most investors are concerned about negative slippage, which results in a less favourable price.
Can slippage be avoided entirely?
Slippage cannot be eliminated, as it is a natural part of trading in dynamic markets. However, investors can reduce its impact by using limit orders, trading during high-liquidity periods, and monitoring broker performance.
Does slippage affect all types of assets?
Slippage can occur in any market, including shares, ETFs, and cryptocurrencies. It is more common in volatile or less-liquid markets, but even large, liquid markets can experience slippage during periods of high activity.
How can I check if my broker is giving me fair execution?
Many brokers now provide execution quality statistics as part of regulatory requirements. Reviewing these reports can help you assess whether your trades are being executed at competitive prices.