Slippage
When a stop order fires in a fast hour, why can the filled price differ from the price the stop was set at?
In plain words
Slippage is the gap between the price a trade was intended to be executed at and the price it was actually filled at. A stop is a trigger, not a guarantee: once it fires, the order executes at whatever prices are available, which in a fast hour may be well past the trigger level.
Why it matters
Slippage turns a planned loss into a larger one. Risk rules sized on the stop price alone understate real exposure, and the faster and thinner the market, the wider the gap between the intended exit and the realised one.
In a real week: BTC, week of 15 October 2018
In the week of 15 October 2018, BTC ranged 21.9% and posted its largest hourly move of 10.6% at 06:00 UTC on Monday, the same hour it set the week's high of 7680.00. In an hour that moved 10.6%, a stop triggered partway through could only be filled at the prices that remained available after the level had already broken.
A common mistake
Assuming a limit order removes the problem. It fixes the worst acceptable price but may leave the order unfilled altogether when the market moves through the level without trading there.