Explain Slippage in Forex

You purchased the USD/EUR at a rate of 1.4000 and trading market now trades at a rate of 1.4025.
As there is economic release that owes in fifteen minutes, one moves the defensive stop to nearly 1.4000 for protecting the winning trade from becoming a losing deal. The numbers are released and the trading market trades and deals through the stop level as low as nearly 1.3975 in few seconds. Rather than filling your cost of nearly 1.4000, one is filled at about 1.3990 and loses deal on the hands.

Why? The reply is there was no one willing to take another side of deal at your cost. A deal is when two individuals agree on the cost but generally disagrees on cost. One believes that the value is really high and the trading market should move in a downward position whereas other people believe that the value is very low and the trading market should increase.
When an important economic number releases, volume starts drying up as most of the popular traders stand apart. They will not do the trading if they do not have the ability to recognize the risk. Therefore, there will not much volume as one would find in the normal market condition. However, there are nowadays, plenty of dealers who try to take benefits of volatility. They would want to do the trading in a specific direction that a market should follow depending on the released number.

Therefore, if everyone thinks that the trading market is moving down, all these dealers try to sell things at that particular time. The issue is you will not find large numbers of traders looking to purchase if the trading market falls in a quick manner. Therefore, the trading market lasts to fall till the purchasers step in and begin taking another side of the deals but they purchase at their own cost and your cost does not matter to them. In the above mentioned example, sell stop order starts becoming the market order when the designated cost is printed. Therefore, when the trading market traded to one’s stop level of nearly 1.4000, the order became a marketing order.

When you sell at the trading market, you match up with someone who is purchasing. If they only purchase under the sell stop cost, you will definitely be filled at the specific level. This is known as slippage and is present in each market in this world. This takes us back why several traders do not do the trading in the environment. Therefore, if one is trading in the volatile market surrounding, one needs to prepare for the slippage. It is regarded as the true nature of the trading game.