Direct Answer
Arrival price slippage is the difference between the average execution price of an order and the market price when the order arrived at the desk or algorithm, signed so that a positive number is a cost. It is the most common measure of trading cost against a pre-trade benchmark. A positive value means the order paid more (buy) or received less (sell) than the arrival price; a negative value means price improvement relative to arrival.
Arrival Price Slippage: Formula, Meaning, Signals, Examples and How to Use It
How Is Arrival Price Slippage Calculated?
Arrival price slippage is the difference between the average execution price of an order and the market price when the order arrived at the desk or algorithm, signed so that a positive number is a cost. It is the most common measure of trading cost against a pre-trade benchmark.
Formula: Slippage = side x (Average Execution Price - Arrival Price) / Arrival Price, where side = +1 for a buy and -1 for a sell
Inputs:
- Average execution price of the fills
- Arrival price (often the midpoint when the order was received)
- Order side
Worked example. A buy order arriving at a midpoint of 50.00 and filling at an average of 50.06 has an arrival price slippage of 0.12%. The inputs are illustrative numbers, not market data.
Reading it. A positive value means the order paid more (buy) or received less (sell) than the arrival price; a negative value means price improvement relative to arrival. It is often quoted in basis points and averaged across orders.
Limits. It captures market movement during the execution as well as the order's own impact, and cannot separate the two on a single order. Unfilled quantity is ignored, so a trader can show low slippage by only filling when conditions are favorable.
What is Arrival Price Slippage?
Arrival price slippage is the difference between the average execution price of an order and the market price when the order arrived at the desk or algorithm, signed so that a positive number is a cost. It is the most common measure of trading cost against a pre-trade benchmark.
How to use Arrival Price Slippage
A positive value means the order paid more (buy) or received less (sell) than the arrival price; a negative value means price improvement relative to arrival. It is often quoted in basis points and averaged across orders. A reading alone is never a buy or sell signal; it needs context from price structure, volume, volatility and the broader market regime.
Strengths
- Anchoring to the price at order arrival fixes the benchmark before any trading happens, so it cannot be improved by how the order is worked.
- A signed, percent form allows orders of different size and side to be pooled and averaged into a desk-level cost figure.
- Reproducible when the formula and data convention are fixed.
Weaknesses and limitations
- The result depends on which arrival timestamp is recorded, such as decision, routing or first child order time, which can differ by seconds or more.
- The midpoint used as arrival price is not itself executable, so a wide-spread stock can show a cost even for a fully passive fill.
- Correlated indicators can create false confidence by repeating the same underlying information.
Editorial and risk note
This page is educational content, not individualized investment advice. It should not imply guaranteed prediction, accuracy or outperformance.
Frequently Asked Questions
Is Arrival Price Slippage a buy or sell signal?
No. A positive value means the order paid more (buy) or received less (sell) than the arrival price; a negative value means price improvement relative to arrival. It captures market movement during the execution as well as the order's own impact, and cannot separate the two on a single order. A trade built on it still needs a trigger, an invalidation rule, a position size and realistic execution assumptions.
What is the best setting for Arrival Price Slippage?
Arrival Price Slippage takes these inputs: average execution price of the fills; arrival price (often the midpoint when the order was received); order side. There is no universal best setting for the tunable ones, so test them across instruments, regimes and out-of-sample periods and favor stable parameter regions over one historical winner.
Can Arrival Price Slippage be used by itself?
It captures market movement during the execution as well as the order's own impact, and cannot separate the two on a single order. Unfilled quantity is ignored, so a trader can show low slippage by only filling when conditions are favorable. For that reason it is read next to measures of direction, participation, valuation, liquidity and risk, not alone.
Does Arrival Price Slippage work on every timeframe?
The calculation (Slippage = side x (Average Execution Price - Arrival Price) / Arrival Price, where side = +1 for a buy and -1 for a sell) can be run on any bar size, but behavior is not portable: a reading on a five-minute chart describes a very different market window from the same reading on a daily chart. Validate the exact timeframe before relying on it.
Why does Arrival Price Slippage give false signals?
The result depends on which arrival timestamp is recorded, such as decision, routing or first child order time, which can differ by seconds or more. The midpoint used as arrival price is not itself executable, so a wide-spread stock can show a cost even for a fully passive fill. Lag, noise and regime changes add to this, because market participants react to new information after the reading is calculated.
How should Arrival Price Slippage be backtested?
Rebuild Arrival Price Slippage from average execution price of the fills using point-in-time data, write the rules before testing, include delisted securities where relevant, model realistic fills and costs, reserve a validation sample and compare with a simpler baseline.