What is meant by slippage in trading?

Slippage in trading refers specifically to the difference between the expected price at which a trade is executed and the actual price at which the trade is filled. This phenomenon often occurs in fast-moving markets where prices can change rapidly, leading to the situation where the trader does not receive the anticipated rate, resulting in either a more favorable or an unfavorable price.

For instance, if a trader places an order to buy a stock at $50 but the order gets executed at $50.05 due to market fluctuations, the slippage is $0.05. This concept is crucial for traders as it can significantly impact the profitability of their trades, especially in volatile markets or with large orders. Understanding slippage helps traders better manage their expectations and refine their strategies regarding entry and exit points.

The other options do not accurately capture this specific and important aspect of trade execution. For instance, the time taken to execute a trade, the volume of securities traded, and the amount of commissions paid are related to trading dynamics but are not directly defined as slippage.