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What is slippage factor? Slippage factor 100% - what does this mean?


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Guest anders

I understand what slippage is, but what it does it mean where the platform says "slippage factor 100%"?

 

I interpret it as meaning it's possible for me to lose my entire long position. For example, the share tanks to zero when markets are closed with no guaranteed stop loss in place (silly boy!). If it does mean that, does the same 100% limit apply to shorts? Loses of above 100% on short positions are possible I believe.

 

Does anything not have slippage of 100%?

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Hi @anders - Slippage factor is used, almost as an arbitrary integer, to work as a scaling factor for calculating margin. In theory the higher the slippage factor (usually 25%, 50%, 75% or 100% - however can in theory be any percentage) the riskier the trade as it would feed into the calculations below to increase margin requirements. 

The three calculations are

No Stop: Bet size x price (in points) x deposit factor (%)

Stop: (Deposit requirement for no stop x slippage factor %) + (bet size x stop distance from current level)

G Stop: The larger figure of the two calculations below:

  • Bet size x stop distance (in points) + limited risk premium
  • Bet size x price (in points) x deposit factor (%)

If you have any other questions please let me know. You can also check out our article on IG.com "What is slippage and how do you avoid it in trading?" which may be useful. 

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Thanks @JamesIG Turn out I was quite off in my thinking then, in that "slippage factor" has little to do with "slippage" that might occur in relation to opening or closing a trade.

To answer my other question, a bit more searching reveals that some commodities like Oil and Natural Gas, Cryptocurrencies such as Bitcoin/USD, FX like GPB/USD, and (perhaps interestingly) all the bonds I looked at except UK Long Gilt have Slippage Factors of less than 100%.

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