What are slippage and re-quotes on ?

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A diligent beginner who has come to , mastered the basics of technical analysis, worked out his strategy and tactics on demo account and achieved a steady growth of the virtual deposit, in anticipation of real earnings opens a trading account with his favorite broker and starts trading, not even realizing that there are many "pitfalls", one of which is Re-quotes and slippages.

Requotes and slippages in trading practices at

The concepts of requotes and slippage are inextricably linked. Traditionally, we will use a simple example. A trader opens long position on currency pair EUR/USD in a point 1 at level 1,29442. The price goes in the right direction, the trader decides to fix the profit in point 2 at the level of 1.29874.

However, during the processing time of the broker's order, the price has fallen below point 2, and instead of enjoying the growth of money on the deposit, the trader sees approximately the following picture.

The trader is again trying to fix the profit and he succeeds to do that only at point 3 at the level of 1.29755, which is almost 12 pips less than expected. Do I need to remind you that in EUR/USD, trading with a standard lot, 12 pips is $120? Another option is also possible, when stop loss brings the loss sometimes a few tens of points more than planned.

What really happened?

In fact, the trader became familiar with slippage and requotes. Under slippage The difference between the price at which the trader has declared execution of the order, and the actual price at which the broker has executed this order is understood. That is, slippage occurs when during the time of processing of the order from the trader to the liquidity provider executing it (and it is fractions of a second) the price changes its value and execution at the declared price becomes impossible. Slippage can be positive or negative, depending on where the price has moved.

There can be several reasons for slippage:

High volatility The currency market, especially at the time of important economic releases such as the interest rate decision or NonFarm Payrolls;
Slow order execution resulting from communication failures during order transmission on the trader's or broker's side;
And, sad to say, the fraud of the broker himself. It is worth noting that this is a sin of the so-called market makers or "kitchens" that deliberately delay the execution of orders because the trader's loss is their gain.

With requotes everything is much simpler. Requote (from "re-quote") - it is an inquiry of the broker about execution of the order at the new price. Such delay occurs due to the same reasons that we described above. If the price moves quickly, and the execution is stated by the broker only at the price (Instant Execution) specified in the order, then requotes can be a significant problem when trading, for example, on good news.

requote_3 — Fig. 3. Example of repeated price request.

Instant Execution and Market Execution and slippage

For a deeper understanding of the process, it is worth understanding the different ways of executing orders. There are systems of Instant Execution and Market Execution. What is the difference between them?

In the system of Instant Execution, the broker will execute the order exactly at the requested price or issue a requote in case of its change, as in the example above.

Let's say a trader sends a request to a broker to open a position to buy EUR/USD at 1.2950. Processing of the order is not instantaneous and can take up to 20 seconds. During this time the following options are possible:

The price has not changed - the broker will execute the order at the requested price.
The price went down - the broker will execute the order at the requested price.
The price went up - instead of executing the order, the trader will receive a requote message.

The advantage of the Instant Execution system is to perform the entry with the predetermined requirements of the trader.

In the system of Market Execution, the broker will execute the order not at the requested price, but at the current market price.

Same situation: The trader sends the broker a request to open a position to buy EUR/USD at 1.2950. The following options are possible:

The price remains in place - the broker will execute the order at the requested price.
The price went up or down - the broker will open a deal at the current price.

The advantage of the Market Execution system is the fast execution of orders. The disadvantage is the execution of the order at the current price. In case of increased volatility, the price can change abruptly and there is a great risk of getting an order opened at a price that has a big discrepancy with the requested one.

Ways to combat slippage on

In fact, slippage is not only unpleasant, but often unprofitable as well. There are several ways to combat slippage. They do not give a hundred percent guarantee of elimination of slippage, but they will allow minimizing the risk of loss in case it occurs.

Method #1: Correcting Orders in the MetaTrader 4 Terminal

When opening a new order in the trading terminal MetaTrader 4, the trader can set the maximum deviation from the requested price, if exceeded, the order will not be executed, and the trader will receive a message of requotes.

Figure 4. Using the maximum deviation from the requested price.

Method #2: Using pending orders

Using pending orders Limit and Stop groups, as well as StopLoss and TakeProfit will help avoid slippage in most cases, although they will not have the desired effect in case of very sharp price hikes.

Method #3: Choosing the right broker

When choosing a broker, it is worth carefully reading the technical conditions of order execution, which, incidentally, beginners often ignore, paying more attention to all sorts of bonuses. Most of the time-tested -brokers use the speed of order execution as a competitive advantage.

To summarize, it is worth saying that the main point when protecting against slippage and requotes is the choice of broker. Unfortunately, in spite of the fact that most brokers declare the same trading conditions for demo and real accounts, when trading on a demo account the orders will be executed lightning-fast and you will hardly see any slippage. That's why beginners should not be lazy or open the deposit at the broker, being flattered by some, often doubtful, preferences. Choose a quality broker, learn the trading with pending orders, improve your skills - and you will maximally protect your deposit from unexpected losses.

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