WHY slippage exists: a market order promises speed, not price. It marches up (or down) the book eating each level's available shares until your quantity is filled. If your order is bigger than the top level, later shares fill at worse prices → the average fill price drifts away from the quote.
WHY partial fills exist: a limit order promises price, not completion. If not enough counterparties want to trade at (or better than) your limit, only the available portion executes; the rest rests on the book or cancels (depending on order flags like IOC/FOK).
Deriving it from scratch (why the average, not the last price?): You pay each chunk at its own level's price. Total cost is a sum of price×size. To compare against a single quoted number you need one representative price — the size-weighted mean, because a big chunk at one level should count more than a tiny chunk at another. That is exactly pˉ=∑piqi/∑qi. Slippage is then just "how far did that weighted mean drift from where I aimed."
For a sell market order you eat bids downward, so S=p0−pˉ (you receive less than the quote).
Imagine a candy shop. The sign says "candy ₹5". But there are only 3 candies at ₹5, then 4 at ₹6, then more at ₹7. If you want 8 candies, you can't get them all for ₹5 — you scoop up the cheap ones, then pay more for the rest. The average price you paid ends up higher than the sign: that extra bit is slippage. And if you told the shopkeeper "I'll pay ₹5 and not a rupee more," you only get 3 candies — that's a partial fill; the other 5 you just don't get.
Dekho, screen pe jo price dikhta hai wo sirf top of the book ka best price hota hai, aur usme sirf thodi si quantity available hoti hai. Jab tum ek bada market order lagaate ho, to tumhara order pehle wo cheap shares kha jaata hai, phir agla mehenga level, phir aur mehenga — is tarah tumhara average price upar chala jaata hai. Screen wale price aur actual average price ka jo gap hai, usko slippage kehte hain. Yani "speed ke badle price ki keemat".
Partial fill tab hota hai jab tum limit order lagaate ho. Limit order kehta hai "isse zyada main pay nahi karunga". Ab agar us price pe sirf 100 shares available hain aur tumne 250 maange, to sirf 100 fill honge, baaki 150 book pe wait karenge (ya IOC ho to cancel ho jaayenge). To yahan price to guaranteed mil gaya, par pura order complete nahi hua — ye hai partial fill.
Yaad rakhne ka simple rule: Market order → price ki tension, Limit order → fill ki tension. Dono ek saath perfect nahi mil sakte — price certainty, fill certainty aur speed, in teeno me se sirf do choose kar sakte ho. Isliye traders liquidity dekhte hain aur bade orders ko chote tukdo (slicing) me todte hain taaki slippage kam ho.
Ek important baat: slippage sirf loss nahi hota — kabhi market tumhare favour me move kare to favourable slippage bhi ho sakta hai. Aur slippage ko bid-ask spread mat samajh lena; spread top-of-book ka chhota cost hai, slippage tab badhta hai jab tumhara size top level se bada ho.
