Slippage simply refers to the difference between the expected price of a trade and the actual price at which a trade is executed. This happens because the market becomes very volatile or there is a lot of liquidity coupled with placing orders at major news events. Traders in the Netherlands find the dealings frustrating and cost-inefficient while they face unanticipated losses. However, there are a few strategies that traders can use to minimize the chances of slippage and receive an effective trading experience with a trusted Forex broker in Netherlands.
The best way through which slippage can be avoided has to do with selecting a Forex broker in the Netherlands that provides fast execution speeds for reliable dealing. The slippage is certainly noted when the market is moving fast as even a slight delay in order execution leads to slippage. A broker with a quality platform, one that executes the trade instantly or at a low latency level, will make sure your order is executed close to its expectation. The important thing to look for when choosing a broker is high technology and trading infrastructure handling orders at lightning speed during times of high volatility.
There are several ways to prevent slippage; it’s a matter of understanding what kind of orders you use. More likely to get slippage with market orders because, in fast markets, these orders get filled right away with the best price available and can change so fast. Thus, limit orders are the popular alternative. This is because a limit order would ensure that the trade gets executed at the quoted price or better. Hence, there is less likelihood of slippage. Even though there is a possibility that your limit order may not get filled if the market price moves away from your preferred entry point, limit orders provide more control over the price at which your trade will be executed.
Time plays an important role in avoiding slippage. Slippage is most likely to happen during periods of low liquidity, such as off-peak hours or markets with fewer trading activities. Dutch traders must be aware of when the Forex market is most liquid and attempt to execute their trades at these times. Overlapping of the European and U.S. trading sessions is usually the most liquid period, thus reducing the risk of slippage. Another way to protect against slippage would be to avoid trading during important announcements or events that sharply move prices.
Selecting the right currency pairs can also help in reducing slippage. Major currency pairs, such as EUR/USD, typically have tighter spreads and higher liquidity, therefore less prone to slippage compared with exotics and less frequently traded currencies. A Forex broker in Netherlands would definitely help you in locating as many currency pairs with lesser risks associated with slippage as they are offering. The better ones are to stick by liquid pairs when you feel vulnerable about price movement related to slippage.
Lastly, one must keep track of the quality of the execution by your broker. All reliable Forex brokers in the Netherlands are usually transparent with regard to their order execution policies, such as their slippage statistics. Most of the brokers allow access to the detailed history of execution which describes how the orders were filled compared to the price requested. Traders will be able to establish if slippage is an ongoing problem and change the trading strategies to correct that.
While slippage is one of the constituents of Forex trading especially in highly liquid markets, it can be an aspect that reduces significant loss by following the set steps. The right selection of Forex brokers in the Netherlands, proper selection of appropriate order types, proper timing of trades, and trading on liquid currency pairs can really minimize severe aspects of slippage for a trader with improved trading results in the future.
