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Exit slippage versus entry slippage

Entries get all the attention. A trader logs the difference between the requested and filled price on entry and decides whether execution is acceptable. Exits get less scrutiny, though they cost just as much.

On a stop loss, the exit is a market order in a moving market, as discussed elsewhere. On a take profit, it's a limit order. On a manual close, it's a market order at a time of the trader's choosing.

Each type has its own cost profile. Manual closes often occur at moments of stress or excitement, when spreads are wide and prices are moving. Limit exits occur at a quiet, planned price but are subject to the touch-versus-through rule.

A table of average slippage by exit type, built from a few hundred trades, shows where the leakage is. If manual exits cost twice as much as limit exits, the strategy might gain by using more pre-set targets.

There's also the question of which side of the spread each exit crosses. A manual close of a long hits the bid, always. A limit close of a long waits for the bid to reach the target.

A few finer points make the comparison fairer. First, separate exits by their trigger: manual closes, server-side stops, server-side targets, and expert advisor closes each travel a slightly different path. Second, record the market condition at the exit, such as whether a news event was within five minutes. Third, compare in pips and also as a share of the trade's gross profit, since a 0.3 pip leak matters far more on a 2 pip winner than on a 10 pip one.

Many traders find that the exit side is the cheaper one to improve, because exit logic is easier to change than entry logic.

Which exit type costs the most in the logs, and was the answer a surprise?

Entry slippage gets more attention because traders notice it immediately, but exit slippage can matter more for overall results. Exits often happen in less controlled conditions, such as stops triggered during fast moves or targets hit during spikes. Stop exits in particular tend to slip, since they become market orders when triggered, often when price is moving quickly against the position. Measuring slippage separately for entries, stop exits and target exits shows where costs are concentrated. A strategy might show little entry slippage but significant stop slippage, which increases average losses beyond the planned stop distance.

When I finally split my slippage log by exit type, I assumed stop-losses would be the expensive ones, and they were, but the surprise was manual exits. I had about 220 trades in the sheet, and the average slippage on stops was 0.6 pips, while my hand-closed exits during fast moves averaged almost 0.9. Those were the trades where I panicked and closed at market while the spread was wide.

Take-profit orders were nearly free, which makes sense, because they fill on a limit. That told me something about my own behaviour, and not only about the broker: the trades that cost me the most were the ones where I had no plan for the exit.

After that I changed one habit. If I want to get out early, I try a limit order a half pip from the current price first, and only use a market close if the move is clearly running away. Over the next month the average cost of manual exits fell by about a third.