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For example, suppose you purchased 1,000 shares of stock XYZ at a price of $50 per share. In order to protect yourself in the event that the price moves against you, you place a protective “stop” order (an order to sell) at $49. So your worst-case scenario is that you’ll lose $1 per share, which in this case equals $1,000, right?



Wrong. If the price falls below $49 without touching the exact price of $49 (remember, stock markets are “thin” compared to forex), one of two things will happen. Either your order will not be executed at all, or it will be executed at a price in the vicinity of $49. Amazingly, the executed price is almost always less favorable than the price you desired! Slippage cuts into a trader’s pro?ts and is a major headache for stock and futures traders.