What role does slippage play in trading?

Slippage occurs when a trade is executed at a different price than expected, which can happen during periods of high volatility or low liquidity. It typically results from the time delay between placing an order and its execution. When markets are moving rapidly, the price at which a trader intended to buy or sell may not be available at the moment the order is filled, leading to this discrepancy. Slippage can be both positive and negative, depending on whether the final execution price is better or worse than anticipated. Understanding slippage is essential for traders, as it can impact profitability and risk management strategies.