How To Minimize Trading Slippage

Slippage is one of those silent profit-killers that most traders underestimate—until it starts eating into their results. In simple terms, slippage is the difference between the price you expect to get and the price you actually receive when buying or selling a stock.

It can happen for many reasons: market volatility, low liquidity, or your own order size being too large relative to the market depth. As your account grows, so does the challenge—because a big order in a small market can push the price against you before you’re even filled.

If you want consistent results from your trading systems, you need a deliberate plan to manage slippage. Here are three practical ways to keep it under control.

Method 1. Trade More Liquid Instruments

Liquidity is your best friend when it comes to reducing slippage. The more liquid a stock is, the easier it is to get filled close to your desired price. If you trade thinly traded small caps, even a moderate order can push the price higher when buying—or lower when selling.

As a rule of thumb, keep your position sizing small relative to the average daily dollar volume of the stock. For example, if a stock trades $5 million per day and your order is $500,000, you’re trying to take 10% of the daily turnover. That’s almost guaranteed to cause noticeable slippage.

Instead, focus on larger, more liquid stocks where your trades represent a tiny fraction of the daily activity.

Method 2. Use the Right Order Types

Many traders default to market orders for speed—but speed can come at a cost. A market order tells the broker to execute immediately at the best available price, which may be far worse than the current quote if liquidity is thin or spreads are wide.

Instead, use limit orders to specify the maximum price you’ll pay when buying or the minimum you’ll accept when selling. Limit orders give you control over execution price and can greatly reduce slippage, especially in fast-moving markets.

If you trade with platforms like Interactive Brokers, consider their adaptive algo order types, which try to balance execution speed with price improvement. For more on this, check out our guide to order types.

Method 3. Diversify Across Systems and Markets

Even with the most liquid markets and careful order placement, slippage can creep in as your capital grows. One effective way to manage this is by diversifying—not just across stocks, but across multiple systematic trading strategies and markets.

Running several uncorrelated systems spreads your trades over different instruments and timeframes, meaning smaller position sizes per trade. This reduces market impact and helps keep slippage to a minimum.

Diversification also supports better risk control. If one system experiences higher slippage due to unusual market conditions, others may not be affected.

Bonus: Track and Review Your Execution

You can’t improve what you don’t measure. Use a trade tracking spreadsheet or broker execution reports to record the expected price and actual fill price for every trade. This helps you spot patterns—perhaps slippage is worse in certain stocks, or during specific times of day.

Armed with this data, you can adjust your trading plan: tighten liquidity requirements, refine position sizing, or shift to different order types.

The Bottom Line

Slippage is part of trading life, but it doesn’t have to be a profit-draining mystery. By choosing liquid markets, using the right order types, and diversifying your systems, you can significantly reduce its impact. And by tracking execution over time, you’ll have the data you need to keep refining your approach.

In systematic trading, small edges add up over thousands of trades. Slippage control is one of those edges—it may not be exciting, but it’s measurable, repeatable, and entirely within your control.