Within one minute after important economic data is released, these are the times where there are the highest amounts of trading activity and the biggest price moves. Knowing this, the concept of price slippage is easy to understand:

Most forex trading platforms have very fast order execution, meaning that once you click on the ‘buy’ or ’sell’ button your order will be filled within one or two seconds. Price swings are so volatile around the news release times, however, that there might be very large price jumps in just a few seconds, meaning that the price could skip from 1.2100 to 1.2115 and never even hit the values in between.

So if you were to place a market order right as this was happening, and it had to take two seconds before the order was filled, due to these rapid price jumps you could enter the market 30 pips away from where you intended to! This is certainly not good, and it can actually have the effect of causing massive gains or losses in the window of just a few seconds. Rapid price jumps most often occur within a 15 minute window of the release of significant economic data.

The second important thing to understand is the typical manner in which prices fluctuate around the times of significant economic news releases.

A good exercise that can help you expand your understanding of this is to get into the habit of sitting and watching at your trading station around the time that significant economic metrics are released.

Within 1-2 minutes of the data release, this is the time where there are the largest and most unpredictable price swings. If you’re looking to earn pips in a controlled manner you’ll probably prefer to stay out of the market during this time and simply watch, or if you trade long-term time frames and shoot for 200+ pip gains then you can simply ignore this piece of news.

During this time the large price swings are due to traders all over the world placing trades right after the release, and you’ll normally see a huge price swing followed by a correction.