Slippage Capture refers to the advantageous situation where a trade executes at a price more favorable than the initially quoted or expected price. This positive deviation from the predicted trade cost typically occurs in rapidly moving markets or when significant hidden liquidity becomes available. It represents an unexpected benefit to the trading party.
Mechanism
This phenomenon occurs when a market order is placed, and during its routing and execution, the actual price at which the transaction is completed is better than the price observed at the order’s initiation. This can result from favorable micro-market structure dynamics or swift price improvements between order submission and execution.
Methodology
While not a direct strategy to control, traders can position themselves to potentially benefit from slippage capture by employing limit orders placed strategically away from the current market price, anticipating favorable short-term price movements. Executing larger orders during periods of exceptional market depth might also increase the probability of capturing positive slippage. Advanced algorithms may attempt to predict such occurrences.
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