Concentration, Catalysts, and Crickets: Brewing the Perfect Slippage Storm

In today’s trading environment where a single stock dominates an index, you must be careful with your order placement (if you can) around potentially large news events.

I am late with this post, but my client (I program for him) suffered through a Perfect Slippage Storm.  A short-term system is only as good as its ability to be properly executed.    On August 27th, 2025, NVIDIA announced after the market close.  According to ChatGPT.

Yes—that timing lines up with Nvidia’s earnings release hitting after the bell. On Wed, Aug 27, 2025, outlets were primed for the NVDA press release around 4:20 pm ET; live blogs called out that exact time window, and NVDA headlines/press release started landing shortly after, with shares dipping in early after-hours. That kind of instant move in NVDA typically ripples straight into NQ.

Check out the following graphic.

The Perfect Slippage Storm!

Can this really happen?

Come on – this is a 5-minute bar, right?  A lot of things can happen in five minutes.  I was a futures broker for many years and my rule of thumb during my tenure was you MAY get out at the low of the minute bar if there is a hiccup and your sell stop is blown.  Here is a one-minute chart.

Some orders were filled at the tick up on the 2nd minute bar.

My client wasn’t lucky this day and got filled near the low of the 2nd minute bar.  He was using a % trailing stop and when the high breached his threshold his protective stop was cancelled, and the new stop was implemented.  All this activity takes time.  And this strategy is professionally managed.

Why was this a perfect storm?

The report pop printed a new intraday high, likely tripping resting buy-stops and in this case pulling trailing protective stops tighter. Those sell-stops then fired into a thinning book after 4:00 p.m. ET, where Nasdaq futures liquidity is razor thin. Some orders were rejected or re-priced and ended up converting to market, worsening slippage. In this case, my client would have been better off if the trailing-stop threshold hadn’t been touched.

Electronic Trading and Fast Market Conditions and Not Held Order!

You believed the trade was up $400, but your day-end statement shows a loss of –$3,400. That disconnect usually comes from execution during a fast market. When your order is not held, the broker (or algo) has time/price discretion and no obligation to fill at a specific price. In a sudden air-pocket, quotes vanish and price gaps; the broker can’t predict the next print, so the only thing he can do is hit the first available liquidity. The result is slippage and a gaping difference between what is on the screen on what is in your pocket or the lack thereof.

A Stop Limit order can help during spikes or down drafts

This type of order is not universally available – especially when using algos.

A buy stop-limit order is a two-part order used to enter long above the market (or cover a short) with price control.

  • Stop price (trigger): When the market trades at or above this price, your order activates.

  • Limit price (cap): Once activated, the order becomes a limit buy at your limit price (or better). It will not pay more than the limit.

What should my client do in the future?

He tested his strategy over 15 years of data and felt secure enough to trade the system.  He knows that this market action could have just as easily gone in his favor.  Had the initial reaction carried on, he may have made a nice profit.  Should he augment his strategy to get out at the end of the day and then get back in – step over post-closing reports?  Maybe, but there is always the potential of slippage on this out and back in trade.  Also, you would need to use discretion as to when a handful of stocks controls the entire index.

Percent trailing stops only help if your profit trigger is meaningfully large and you’re willing to give back a realistic slice of that profit.

When a client shows me an equity curve that looks too good to be true, my first question is whether they’re using a percent trailing stop. I hope they say no—but usually it’s yes. Then I ask two things:

  1. What’s the profit threshold that arms the trail?

  2. How much are you willing to give back once it arms?

If the threshold is small and the give-back is ~20% or less, I know we’re in Best-Case Scenario Syndrome: backtests assume friendly fills. Platforms like TradeStation or MultiCharts will print a theoretical fill on every trade, but as we saw earlier, the gap between theory and actual can be huge.

You must accept that slippage is going to occur

If you don’t then you cannot trade.  You might come back at me and say: “Well, I will only use stop limit orders.”  That is great. but what about when exiting a trade.  “I will only develop a strategy that enters on limits – that way I can cut slippage in half.”  That is definitely a possibility.  “I will execute myself and forgo the convenience of algo order placement.”   Well, you better quit your day job and trade during the day.


Discover more from George Pruitt

Subscribe to get the latest posts sent to your email.

Leave a Reply