Spread and slippage are two critical factors that can significantly impact a trader’s ability to achieve consistent profits in the Foreign Exchange Market.

Spread (Transaction Cost)

The spread is the difference between the bid and ask price, essentially the cost of entering a trade.

A wider spread (common in exotic pairs or during low liquidity) reduces profitability, especially for scalpers and high-frequency traders who rely on small price movements.

Brokers with tight spreads (like ECN brokers) help traders retain more profits over time.

Slippage (Execution Variance)

Slippage occurs when orders are filled at a different price than expected, usually during high volatility (news events, low liquidity).

Negative slippage can turn a winning trade into a loss or exacerbate losses, disrupting the risk-reward ratio.

Traders can minimise slippage by avoiding high-impact news events or using limit orders instead of market orders.

Impact on Consistency
High spreads and frequent slippage erode profits over time, making it harder to maintain a positive expectancy in trading.

Traders must choose brokers wisely, trade during peak liquidity hours, and adjust strategies to account for these costs.

By managing spread and slippage effectively, traders can improve execution quality and enhance long-term profitability.