What is Latency in Forex Execution?

Understanding Latency

Latency is the time delay between sending an order and receiving execution confirmation. Measured in milliseconds, latency determines how quickly your trades reach the market. High latency means prices can move significantly between order submission and fill, increasing slippage and degrading strategy performance—especially critical for scalpers and algorithmic traders.

Sources of Latency

Latency originates from multiple sources: physical distance between your computer and broker servers (signal must travel through fiber optic cables), internet routing inefficiencies, overloaded broker servers during high-volume periods, slow trading platform software, WiFi versus wired connections, and computer processing delays. Each hop adds milliseconds that compound into substantial delays.

Impact on Trading

For scalpers and HFT strategies relying on millisecond precision, latency is critical. A 200ms delay means price can move 2-3 pips on major pairs during volatile periods—enough to turn profitable trades into losses. Swing traders experience less impact, but latency still affects entry quality and stop-loss execution during fast markets.

Reducing Latency

Host trading systems on a VPS located in the same data center or region as your broker's servers—proximity dramatically reduces latency. Use wired ethernet connections instead of WiFi. Close unnecessary applications consuming bandwidth and CPU resources. Upgrade to fiber internet. Some brokers offer low-latency cross-connects or co-location services for algorithmic clients willing to pay premium fees.