Lesson 7 of 14 · 2 min
Liquidity and slippage
What liquidity means, why thin markets jump, and what slippage quietly costs you on every trade.
Liquidity is how much is available to trade near the current price: how many contracts are waiting in the order book, at how many prices.
- Thick (liquid) market: lots of contracts at every price. You can buy or sell without moving the price much.
- Thin (illiquid) market: few contracts waiting. Even a small order can push price several ticks.
Why thin markets jump
When there's little waiting in the book, a market order uses up one price and moves on to the next, and the next. That's why price can "gap" a few ticks in one moment: overnight, on holidays, and in the seconds around big news, when traders pull their orders.
What slippage is
Slippage is the difference between the price you expected and the price you actually got.
- You click buy at 6,000.00 and get filled at 6,000.50. That's 2 ticks of slippage.
- On one ES, that's $25. On MES, $2.50. On NQ, 2 ticks is $10.
It mostly hits market orders and stop orders in fast or thin moments, which is exactly when stops tend to trigger.
What it costs you
Slippage is a cost on every trade, just like commissions. A few ticks per trade adds up over hundreds of trades. Count it in your plan.
Simple ways to keep it small
- Trade the most liquid contracts and hours (ES/NQ during RTH).
- Be careful in the seconds around scheduled news.
- Know the trade-off: a limit order controls your price but might not fill; a market order fills but controls nothing.
Quick recap
- Liquidity = how much is waiting near the price.
- Thin markets jump because orders use up several prices.
- Slippage is a real cost. Plan for it.
Want to see how this is traded every day? That's the Inner Circle →
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