What does slippage typically refer to in trading?

Slippage typically refers to the difference between the best execution price available at the time a trade is placed and the actual price at which the trade executes. This phenomenon occurs primarily in fast-moving markets, where the price can change rapidly while an order is being fulfilled. For instance, if a trader intends to buy a stock at $50 but the order executes at $50.50 due to market fluctuations, the slippage is $0.50.

Understanding slippage is crucial for traders, especially those engaging in high-frequency trading or trading during volatile market conditions, as it can significantly impact trading costs and overall profitability. The other provided options do not encapsulate the concept of slippage; for example, execution speed pertains to the time it takes for an order to be completed rather than the price difference. Thus, recognizing slippage allows traders to better manage expectations regarding execution prices and develop strategies to minimize its impact.