What is Latency in Forex Execution?
Quick Answer: Latency is the time delay between sending an order and receiving confirmation, with higher latency increasing slippage and harming strategies that rely on fast execution.
Understanding Latency
Latency is the delay between sending an order and receiving confirmation. High latency means prices can move before your trade executes, increasing slippage and reducing strategy performance.
Sources of Latency
Latency stems from internet routing distance, overloaded servers, or slow trading platforms. Strategies like scalping or HFT suffer most because they rely on millisecond precision.
Measuring Delay
Use platform logs or third-party tools to monitor order round-trip times. Track latency before and after infrastructure changes to quantify improvements.
Reducing Latency
Host trading systems on a VPS near your broker's servers, maintain wired connections, and close unnecessary applications. Some brokers offer low-latency cross-connects for algorithmic clients.
Latency Spikes
Sudden latency jumps during news may cause orders to execute far worse than expected. When in doubt, reduce size or pause trading until connectivity normalizes.
Learn More About Forex Trading
Now that you understand latency, explore our comprehensive guides: