Question: Why slippage and high volatility happens at midnight MT4/MT5 server time?
Slippage happens when there is no enough liquidity in the market.
Especially around midnight in MT4 server time(GMT+2 – 3), market liquidity in Forex market is normally quite low.
That can cause slippage to your executions or sometimes not executed at all.
In the official website of HotForex, they have mentioned the followings:
When you are trading with a STP(Straight Through Processing) broker and all clients’ orders are executed by its liquidity providers, the slippage and order rejections are caused depending on the liquidity that exists in the inter-bank market.
How Slippage works
All Forex trades are made by OTC(Over the Counter) transaction.
As in there are always a counter-party for your orders, for example, if you buy 1 lot of EURUSD then the order has been executed, then there was someone else selling 1 lot of EURUSD at the same price.
If there is no one on the other hand, your order wouldn’t be executed. Simply, how can you buy one if no one is selling it?
“Liquidity” is created by millions of orders made in the market. As long as there is enough liquidity, your orders will be executed smoothly.
If the liquidity is very low, then your order wouldn’t be executed or executed at the nearest price available.
Of course, the liquidity exists more when more traders are awake and trading.
Midnight of MT4 server time is when the NY exchange market closes.
US Market is surely huge and that is why the liquidity is low during midnight of MT4 server time and slippage often happens.
