Term: Slippage

Slippage is the gap between the price you expected to get on a trade and the price you actually got. If you click buy expecting to pay $50.00 a share and your order fills at $50.06, that six-cent gap is slippage.

It happens because prices move between the moment you decide to trade and the moment your order actually reaches the market and finds a counterparty. An order doesn't fill at a single fixed price sitting in the market; it fills against whatever orders are available at that instant, at the best price offered by the order book (the list of buy and sell orders waiting at various prices). If the price is moving fast, or if your order is large relative to what's available at the top of that book, you end up paying more (buying) or receiving less (selling) than the price you saw on your screen.

Slippage is not the same as a bad fill from a slow platform, though the two often get blamed together. It's most closely tied to two things: volatility (how fast and far prices are swinging) and liquidity (how much size is sitting ready to trade at each price). Thin, jumpy markets—around news releases, at the open, or in low-volume stocks—produce the most slippage. Calm, heavily traded markets produce very little.

The nuance that trips people up is that slippage can work in your favor too, not just against you. It's just the difference between expected and actual price, so if you're buying and the price ticks down before your order fills, you get positive slippage. People only tend to notice and complain about the times it goes against them.