Lesson 2 of 7 · 11 min
Spreads and slippage at news time
In the release minute spreads widen, stops slip and prices gap. Learn why, and what it costs a real position in dollars.
By the end you'll be able to
- Explain why liquidity thins and spreads widen in the minutes around a release
- Work out what a widened spread and a slipped stop cost in dollars
- Say which orders are most exposed at release time, and why
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Your GBP/USD stop is 25 pips away and the spread is under a pip. One minute after UK inflation data, the spread is several pips wide and your stop has filled. The fill price is not the one you set.
A stop inside the jump
Illustrative 1-minute GBP/USD chart around UK CPI at 07:00 UK time (10:30 in Iran in winter, 09:30 in summer). Step through it.
Where the liquidity goes
Liquidity is how much can be traded close to the current price. Normally EUR/USD and GBP/USD have a deep stack of quotes either side of the price, so your order fills where you expect. In the seconds before a big release, the banks and market makers that provide those quotes widen them or pull them, because a quote left in place could be filled at a price the number is about to make stale.
Your broker passes that on. A spread that is 0.6 to 1 pip most of the day can be 3 to 10 pips for a minute or two (typical figures; check your broker’s own spread history for release times). Three things follow:
- Entries cost more. A market order at the release pays the wide spread, plus any slippage on the fill.
- Stops slip. A stop is a resting instruction that becomes a market order once price touches it. If price gaps through the level, it fills at the next price available. This is slippage.
- Open positions lose value on the spread alone. A long position is valued at the bid and closed at the bid; a short at the ask. When the spread widens, the bid drops and the ask rises even if the mid-price has not moved. A short’s stop can be triggered by the ask spiking up while the chart, which shows the bid, never reaches your level.
A limit order behaves differently: it fills at your price or better, or not at all. That is why a take-profit (a limit) is rarely hurt by slippage while a stop often is. Some brokers offer guaranteed stops for a fee; check their terms.
Try it
Switch between Calm market and News release, choose an order type, and send it a few times. Fills are illustrative.
Send the buy stop several times in each condition: in a calm market it fills within a pip of your price, while on the release it can fill several pips away. The limit order never fills worse than your price.
Spread cost = spread in pips × pip value for your trade size. It is paid on every trade, whether it wins or loses.
Two trades a week placed in the release minute at a 6-pip spread cost about seven and a half times as much as the same trades at 0.8 pips. Change the spread to 0.8 to compare.
Quick check
Quick check
Question 1 of 4
Why do spreads widen just before a major release?
Question 2 of 4
You are short EUR/USD with a stop at 1.0870. The chart (bid) peaks at 1.0864 while the spread widens to 6 pips. What happens?
Question 3 of 4
Long 0.30 lots of GBP/USD from 1.2700, stop 1.2675. On the release the stop fills at 1.2661. What is the loss?
Question 4 of 4
Which order fills at your price or better, or not at all?
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