FXRISK Manual

Spread and Slippage Travel Together

Use when: You see occasional large slippage or your edge disappears during certain hours.

Spread widening is a warning light for fill quality.

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Mechanism

Spreads widen when liquidity providers pull or reprice quotes. That same behavior increases the probability of slippage (and the size of the worst slippage). In practice, spread and slippage are correlated signals of the same thing: liquidity stepping back.

Process upgrade: turn this truth into a rule you can actually enforce. If the rule can’t be enforced, it will be broken under stress.

  • Write the trigger condition in observable terms.
  • Write the action in one sentence.
  • Write the penalty for breaking it.
How it kills accounts

You model spread and slippage separately (or you model neither). You keep trading because the spread is “only” a few pips wider. Then the real damage arrives as a handful of bad fills that erase weeks of expectancy.

How it kills accounts:

  1. The rule exists only in your head.
  2. Stress arrives and you improvise.
  3. Improvisation becomes inconsistency.
  4. Inconsistency becomes random results.
  5. Random results become a slow bleed.
Rule that survives

Define a cost regime per strategy. If spread > X *and* volatility is rising, switch to limits or do nothing. If you must use markets, cap size and cap frequency. **When liquidity is leaving, your job is to leave first.**

Rule that survives:

  • Write the trigger in observable terms.
  • Write the action in one sentence.
  • Write the penalty for breaking it.
Example archetype

The trader who loves fast entries in normal conditions, then keeps the same behavior in thin conditions. They pay twice: once in spread, once in markout.

Tell: if your rule isn’t enforceable, it’s a suggestion. Suggestions don’t survive stress.

Deep dive

Two quick checks:

  • Spread ratio: current spread / median spread for that hour. If it’s 2×, treat it as a different market.
  • Slip tail: measure your worst 1% fills. If the tail is non-linear, you need a hard no-trade rule.

Glossary: spread regime, quote withdrawal, markout.

Field checklist

  • Write the rule in observable terms: if X, then Y.
  • Remove choices under stress. Choices become rationalizations.
  • Track the precursor: what state were you in before the mistake?
  • Make deviations costly (size down, pause, review).
  • Turn lessons into gates, not notes.

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