Slippage
Definition
Slippage is the difference between the expected price of a trade and the actual price at which it is executed. It occurs when market prices move between the time a trade is placed and the time it is filled, especially in fast-moving or illiquid markets. Slippage can be positive or negative, but it usually results in slightly worse execution for the trader.
It is a normal part of trading, particularly for market orders or large position sizes.
Why It Matters to Investors
- Reduces realized returns compared to backtested or theoretical results
- More common in volatile or low-liquidity markets
- Can be magnified by large trade sizes or poor execution strategies
- Often underestimated in high-frequency or active strategies
- Accumulates over time and erodes performance
The TiltFolio View
Both TiltFolio systems minimize slippage by trading liquid ETFs and major asset classes. TiltFolio Adaptive uses end-of-day signals and monthly rebalancing, while TiltFolio Balanced uses annual rebalancing. This reduces urgency and allows for calm, deliberate execution.
Both systems are designed to be executable in the real world, not just on paper. We avoid obscure markets or instruments where slippage would meaningfully distort results. TiltFolio Adaptive rotates between highly liquid ETFs, while TiltFolio Balanced maintains consistent exposure to specific liquid ETFs (IEF, TLT, SPY, GLD).
While some minor slippage is unavoidable, we believe smart design and disciplined execution keep it negligible for both systems, even as portfolio size grows. Both prioritize liquid, transparent instruments that can be traded efficiently without significant market impact.
Real-World Application
• A trader places a market order for a small-cap stock and receives a worse price than expected
• An algorithmic strategy backtests well but underperforms live due to execution delays
• A rebalancing system adjusts positions monthly using limit orders to reduce slippage