Slippage, Gaps and Order Expiry
Weekend news makes the price gap at the open. Why does a stop-loss lose more? Why can a limit order come out better? And when does a pending order expire on its own?
Risk warning: forex, CFDs, options, futures and crypto assets usually involve leverage or high volatility, and you can lose more than you put in. This lesson only teaches the concepts; all numbers are for illustration and are not investment advice.
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Text version · Forex: Pending Orders & Risk, lesson 9: “Slippage, Gaps and Order Expiry”
Weekend news makes the price gap at the open. Why does a stop-loss lose more? Why can a limit order come out better? And when does a pending order expire on its own?
Gap: nothing traded at the prices in between
After a weekend or big news, price can gap and open at a new level, with no trades at all at the prices in between. Orders sitting in that empty zone can't fill at their original price.
Stop type: chases at the open, may be worse
Stop-losses and Buy / Sell Stops all "fill at market once the price is hit". When price gaps past them, they can only fill at the open, worse than the price you set: that's slippage.
Limit type: never worse than your price
Limit orders (take-profits included) only fill at your price or better. When price gaps past them they fill at the open, which is actually a better deal: positive slippage.
Pending orders expire too
For order expiry you can choose "good till cancelled" or "good for the day". A guaranteed stop locks in your stop price, but usually costs extra.
Key takeaways
- In a gap, the prices in between never trade, so Stop orders (including stop-losses) fill at the first available price after the open and can lose more.
- Limit orders only fill at your price or better, so a gap can actually give you positive slippage.
- A guaranteed stop locks in your fill price but usually costs extra. Think about gap risk over weekends and before major data.
- Pending orders have an expiry: a good-'til-cancelled (GTC) order stays until you cancel it, while a day order is cancelled automatically at the close.
Try it yourself
You can do these exercises in this lesson's interactive simulation:
- Default "Bad-news gap −60": at what price does the 1.0820 stop-loss actually fill? How many more pips did you lose than planned?
- In the same market, what's the fill price of the Buy Limit at 1.0800? Is the slippage for or against you?
- Click "Good-news gap +60": how many pips did the take-profit and the Buy Stop each slip? Why in opposite directions?
- Go back to −60, turn on "Guaranteed stop", then switch to "Pending: good for the day": which two orders' outcomes change?
Quiz and explanations
- 1. Friday closes at 1.0850 and your long's stop-loss is at 1.0820. Monday opens straight at 1.0780. Roughly where does the stop fill?
- Answer: Around 1.0780.Nothing ever traded near 1.0820. The stop fills at the first available price after the open, losing about 40 pips more than planned.
- 2. The price gaps down through your Buy Limit at 1.0800 and opens at 1.0790. What's your fill price?
- Answer: 1.0790.A buy limit only fills at 1.0800 or lower. The 1.0790 open is cheaper, so it fills at 1.0790 (10 pips of positive slippage).
- 3. You set a pending order as a day order and the price never touches it that day. What happens the next day?
- Answer: The order is cancelled automatically and you need to place it again.A day order expires at that day's close.
Terms in this lesson
- gap (Gap): When price jumps to a new level between sessions without trading at the prices in between.
- guaranteed stop (Guaranteed Stop): A stop-loss that fills at your set price even if the market gaps, usually for an extra fee.
- order expiry (Order Expiry): When a pending order lapses: good till canceled (GTC), or only valid for the day or until a set time.
- positive slippage (Positive Slippage): Getting filled at a better price than you set, such as a limit order filling at a better price on a gap.
- slippage (Slippage): The difference between the price you expected and your actual average fill, which happens when a large market order eats through several price levels.