Slippage on news as a fraction of the move

[Fairman]

Slippage on news as a fraction of the move

A rule of thumb sometimes mentioned is that slippage on a stop during a news spike equals 10 to 30 percent of the spike size. For a 30-pip move, that is 3 to 9 pips. The figure varies by broker and pair.

This ratio is more useful than absolute numbers. A strategy with a 10-pip stop might expect 1 or 2 pips of slippage in normal conditions. In a news spike, that stop could fill 5 pips away.

Measuring the ratio on past releases takes a little work. Pick the releases traded, find the stop fills, subtract the stop price, and divide by the spike range. The result gives a realistic estimate for risk planning.

A fair number of scalpers find that their worst losses are dominated by a handful of such events.

Does the slippage ratio on the account stay close to the rule of thumb, or does it run much higher?