Slippage

Slippage is the gap between the price a strategy assumed for an order and the price the order actually filled at. It comes from the bid-ask spread, market movement between decision and execution, and the size of the order relative to available liquidity.

In a backtest, slippage has to be modeled, filling every order at the last printed price overstates results. A realistic backtest adjusts fills for an estimated spread and slippage so the simulated cost resembles what a real order would pay. Comparing modeled slippage in a backtest against real fills in live trading is one of the most useful checks before scaling a strategy.