Slippage and Spreads Around News Events

7 min read

Slippage and spread widening are two of the most commonly cited effects of trading around news, and understanding what each one actually means helps set realistic expectations.

Both are a normal, predictable feature of markets around scheduled events rather than a platform malfunction, and understanding why they happen makes them far less unsettling when they occur.

What a spread is

The spread is the difference between the buy and sell price of an instrument at any moment, representing part of the cost of entering and exiting a position. Spreads can widen temporarily when liquidity providers face more uncertainty about the fair price of an instrument.

This widening isn't arbitrary - it reflects genuine uncertainty in the market about where the new fair price should sit until enough trading activity has taken place to settle on one.

• Spread: The gap between the buy and sell price at a given moment.
• Temporary widening: Spreads typically normalise once the market absorbs the new information.
• Fair value uncertainty: Widening reflects genuine doubt about where price should sit, not a glitch.

What slippage is

Slippage occurs when an order executes at a different price than requested, most often because the market moved between the moment the order was placed and the moment it was filled - more likely during fast-moving conditions than in calm ones.

Slippage can work in either direction - occasionally in a trader's favour, occasionally against it - though it tends to draw more attention when it works against the position that was intended.

• Slippage: The difference between the requested and the actual fill price.
• Two-directional: Slippage can favour or disadvantage the trader, not only the latter.
• Speed dependency: More likely the faster price is moving at the moment of execution.

Why both increase around news

Scheduled releases can cause a burst of orders arriving at once, alongside genuine uncertainty about where the new fair price should be. Both factors together are why spreads and the likelihood of slippage often rise in the moments immediately following a major release.

Because this pattern is so predictable, it's factored into planning rather than treated as a surprise - the goal isn't to avoid it entirely but to size and place orders with it in mind.

• Order surge: A burst of activity arriving at once around the scheduled release time.
• Predictable pattern: Both effects are a normal, expected feature of news events, not random noise.
• Plan around it: Factor wider spreads and slippage risk into order placement in advance.