When talking about markets that are very volatile and highly unstable, the first market that frequently comes to mind, at least in the minds of most, is the Forex News market. Certainly, when trading with currencies you are bound to find yourself in the middle of a highly volatile market( since a currency’s price is impacted by a great many factors, which includes, though not limited to, disasters, political changes, etc. ).
There is no secret that the movements and instability of the currency market is what allowsa Forex trader to generate a profit, but this too results in a more risky market. As you surely know, higher risks can easily become greater losing trades. When engaging in currency trading, a Trader will try to mitigate risks, and in general, a well educated and experienced trader will succeed in reducing risk. Nevertheless, there can be instances that no matter what a Forex trader does; they will end up having to endure losses. At Times this is a consequence of mistakes made when making decisions, but sometimes this is a matter of just chance (and misfortunes at that ).
Considering that orders are rarely completed immediately, there is a time frame( between the time when you enter the order and the time after it is completed) where the currency’s value can suddenly change; these unexpected changes can generate profits, but they also can generate losses for any Trader. For instance, just imagine that you have set a stop- loss order so that you can offset losses in a currency trade. Now, it comes the time when the currency you're trading begins to fall; the currency reaches the stop- loss level and the program automatically issues an order to stop and exit the trade. Nevertheless, during the few seconds when the order takes to be processed, the currency’s price continues to plummet; by the time the transaction is finally processed your losses have increased as a consequence of these couple of seconds. This issue that takes place given the impossibility of orders to be processed immediately is known as slipage, and it should be very clear by now that it could be potentially devastating for any Trader. Of Course, it is true that slippage could also work out to a Forex trader’s advantage, but generally it's a problem that has unwanted effects.
In the Forex trading market slippage is alwaysa risk that fx traders must put up with, specially at times when the forex market is very volatile or unstable. As well, it's important to know that a Fx broker will always attempt to use slippage to his / her own advantage, even if this means generating losses to you. Don't Forget, you are trading in a Forex broker’s platform system, so they may very well work the market’s volatility to their advantage and use slippage as a method of making profits at your expense.
Despite of this, forex traders normally accept the occurrence of slippage, and in most cases, they are willing to risk it. Notwithstanding the risk of slippage, the potential profits are much too great to be ignored, and so fx traders are willing to keep on trading, even at times when volatility runs high.
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