Slippage refers to the difference between the expected and executed trade price. It is an unavoidable hindrance to your trading profitability; however, this post will explore some strategies you may be able to utilise to mitiage slippage and enhance your trading performance, including how a Liquidity Connect server can make a difference.

Understanding Slippage

Slippage occurs for two main reasons. The first of which is changes in price caused either by market volatility or by the placement of large orders. If you are trading while the market is moving a lot (volatile) you may see rapid price changes that mean you miss out on your expected price. Likewise, placing a large order can move the price against you due to sheer volume.

The second main reason slippage can occur is due to your hardware letting you down. A slow internet connection or an old or poorly performing computer can cause delays in processing orders which can in turn lead to slippage. This is where we come in read to the end of this post to find out more about how a Liquidity Connect server can help mitigate slippage.

Strategies for Reducing Slippage

1. Choose the right broker

  • Fast Execution Speeds - Select a broker with a robust infrastructure and low latency connections to ensure your orders are fulfilled in a timely and efficient manner.
  • Tight Spreads - Brokers with competitive spreads offer better price transparency and reduce the impact of small price movements.
  • Here at Liquidity Connect we partner with a number of Retail Brokers, it is important you choose a broker with the lowest possible latency, compare speeds here.

2. Optimize order size

  • Break Down Large Orders - Divide large orders into smaller ones to reduce market impact and improve fill rates.
  • Use Iceberg Orders - Place a portion of your order on the market while hiding the additional volume, this can help reduce market impact.

3. Trader During Periods of Low Volatility

  • Trade During Overlapping Trading Sessions - When multiple major markets are open (e.g. London and New York), market liquidity is generally higher, reducing the chance of slippage.
  • Avoid News Releases - Although news releases provide opportunity for profitable trades they also create a more volatile market where slippage can be an issue. Trade carefully.

4. Upgrade your hardware with Liquidity Connect!

  • High-Speed Internet Connection - A stable and high-speed internet connection is crucial for minimizing latency and ensuring orders are executed quickly. Our server are hosted in Equinix data centers and as such are in close proximity to the exchanges, allowing for ultra-low latency and minimized slippage.
  • Powerful Hardware: Liquidity Connect server are designed to provide the best possible platform for you to trade on. Unlike your home computer, our servers are specifically built for the purpose of trading, ensuring smooth operation reducing the risk or delays.

Conclusion

Whilst slippage cannot be completely eradicated it can be mitigated through smart trading, powerful hardware and careful broker selection. Head over to liqc.com and get started with a Liquidity Connect VPS today.