Slippage Distribution Explained
Slippage is natural in live markets. The question is not whether slippage occurs, but how it is distributed. A fair execution environment produces roughly symmetrical slippage: approximately equal amounts of positive and negative slippage. This diagram explains what different distributions reveal.
Step-by-Step Breakdown
Zero Slippage
The majority of orders execute at the requested price. This center peak is normal and expected in calm markets.
Positive Slippage
Orders that execute at a better price than requested. In a fair system, this should occur nearly as often as negative slippage.
Negative Slippage
Orders that execute at a worse price than requested. Expected during volatile conditions and fast market movements.
Symmetrical (Fair)
The bell curve is roughly centered: positive and negative slippage are balanced. This indicates the broker passes through market prices without manipulation.
Asymmetrical (Red Flag)
The curve skews heavily negative: most slippage goes against the client. This suggests last-look, selective slippage, or dealing desk intervention.
Published Data
Trustworthy brokers publish their slippage distributions. The shape of the curve is more informative than any single metric about execution fairness.
Key Insight
If a broker claims NDD execution but shows asymmetrical slippage (predominantly negative), something in the execution chain is capturing favorable price movements. This is one of the most powerful diagnostic tools for evaluating broker honesty. Always ask: "Is your slippage distribution symmetrical?"