Slippage

Slippage is the gap between the price you expected when you placed an order and the price you actually received when it filled. Even a market order on a liquid perp can move the book if your size is large relative to available depth.

Three main drivers:

• Thin liquidity — fewer resting orders means each unit of size eats more of the book.
• Large order size — the more contracts you send, the further you walk up (or down) the book.
• Fast-moving markets — in volatile conditions the best bid/ask shifts before your order lands.

Why backtests must model it. A backtest that fills at the mid-price on every bar is systematically too optimistic. Even a conservative flat slippage assumption of 0.05% per side compounded across hundreds of trades can halve apparent returns. More realistic models sample the order book or apply a size-dependent impact function.

Rule of thumb: if removing your slippage assumption makes a strategy unprofitable, the strategy has no real edge.

Check the net P&L impact of realistic fill costs with the P&L calculator.