• Requotes
• Slippage
• Re-quotes and slippage are more important than spreads

There are two problems that can occur with your orders: re-quotes and slippage.

Requotes

Re-quotes occur when you place an “at the market” order and find that your order was filled, or executed, at a different price than what had appeared on the screen at the time you placed your order. 

Sometimes this is unavoidable. When the market is moving quickly, the price can easily change in the few seconds between your pressing the button and the broker executing your trade. 

But sometimes it is not unavoidable at all; sometimes unscrupulous brokers put attractive prices up on their screens in order to win business but then execute incoming trades at prices that are more advantageous to them. 

Requotes are usually a problem with STP brokers. Sometimes it’s because the market is moving and by the time they pass your order through, the price has changed. But sometimes it’s because they don’t pass your order through immediately, or because they post an attractive price on their screen but fill your order at a worse price and pocket the difference.

A market-maker rarely has re-quotes because after all, the prices on their web site are prices that they themselves are posting. However, there is also slippage. 

Slippage

Slippage occurs when you place an order to be filled at a specified rate, but it is filled at a different rate than you requested. For example, you might be long EUR/USD overnight with a stop-loss order to sell your position if it falls to a certain level, but find when you wake up that the market went through that level and you were stopped out at a worse level than you wanted, thereby losing more money than you had budgeted for. 

Slippage can occur when markets are extremely volatile. For example, some big news might come out or some event might happen and the price gaps, making it impossible for a broker to execute at that level. (A price gap occurs when the rate goes straight from one price to another without going through all the prices in between.) In that case, the broker will execute as soon as possible, which may be at a worse price than you had planned. 

On the other hand, like re-quotes, slippage isn’t always an accident. An unscrupulous broker can simply choose to execute your order at a worse price than you had asked for while passing the trade through to the market or hedging their position at the actual rate and pocketing the difference. It’s hard to prove after the fact that this was done purposely. 

Re-quotes and slippage are more important than spreads

When evaluating brokers, many traders focus on how narrow their spreads are. However, the frequency of re-quotes and slippage is probably more important to profitability over the longer term than the size of spreads, which are usually quite modest. You should check your broker’s prices with an independent price feed to see if you are indeed getting the market price or near the market price when you trade. Also, many brokers post data on their website about the percent of trades that are affected by re-quotes and slippage. That’s an important metric to watch out for when evaluating brokers.