The term slippage comes from financial markets. Slippage refers to the difference between the available price we are offered to trade and the price the transaction actually took place at. When trading fixed odds at betting exchanges, a tactic called sports trading, slippage has exactly the same meaning.

Slippage costs money in the long run

In simple words, slippage in sports trading is about the price of the odds we decide to place our bet on, and the price the bet was finally matched at. Furthermore, it is customary to include the exchange’s commissions into the slippage cost, given any kind of commission severely affects the true odds a trade is executed at.

The slippage is particularly important for the viability of our betting system. A change in odds due to slippage would mean a few ticks lost, which is enough difference to extinguish the long-term net profit.

In general, it is recommended to integrate the potential slippage in our trading system, as well as in any other sports betting system.

As most players are not familiar with stock market terms, better to analyze slippage with an example.

What slippage means in sports trading

Suppose I wager €100 as a back bet in favor of a strong team at odds of 1.50. However, in the 15th minute the opposition team scores a goal, leading my selection’s odds to rise at 2.30 (randomly picked figures for the sake of the example). Having set the stop loss in advance at that point, I now lay a bet of €100 at 2.30, aiming to close the trade at minimum loss.

So I placed the lay bet at 2.30, but in the meantime, some other traders and bettors had already placed identical bets. The odds have now moved to 2.32. As a result, I am forced to bet on 2.34, losing 2 ticks in comparison to the original odds, on which I was planning to close my trade.

On top of that, when my bet is submitted into the betting exchange, €5,000 more have been placed as a lay bet at 2.34 quicker than me. That money should be matched first, before my own bet! First come, first served. My lay bet now sits last on that queue.

So, just to be on the safe side, I finally decide to accept the worst price at the time, which was 2.40, wasting 3 more ticks.

At the end, instead of 2.30, I have managed to match my lay bet at 2.40. That difference and market’s behavior is known as slippage.

Is slippage that important?

That difference may seem insignificant. Long term though, if the average expected net profit from each trade is 3 ticks, I will come out a loser if slippage costs 5 ticks on average!

For this reason, we should always take slippage into account when backtesting our trading system before risking any money. If for example, we plan to close the same trades at 2.30, we need to add 5 more ticks to the expected matched price to compensate the slippage factor.

After many trades, we should have an adequate sample of games to estimate whether these 5 ticks could convert our winning system to a failing one or not.

Moreover, the vig or commission, charged by bookmakers and betting exchanges respectively, plays a significant role in the profitability of our system in online betting, as well as in trading. We have already discussed about the impact of commission on our betting system. Additionally, we have explained the importance of odds comparison.

Generally speaking, these small variations in the actual odds may at first seem negligible. Newcomers doubt that placing a bet 0.10 points lower or moving their trade 3 ticks to the opposite direction would be that costly. Well, they could, in fact, turn a bettor or trader from winner to loser.

By meticulously paying the necessary attention to these details, we can by far increase our trading performance and improve our system’s profitability.