What does latency mean in trading?
In trading, latency refers to the time delay between when an order is placed by a trader and when it is received and executed at the exchange. Even a slight delay can cause the order to be filled at a different price than expected, particularly in fast-moving markets.
Why latency matters
Latency is a critical factor for active traders, especially during times of high market volatility. High latency can lead to:
- Slippage (difference between expected and executed price)
- Missed opportunities
- Unintended trade execution at less favorable prices
Key causes of latency:
- Network speed or internet connection
- Order routing delays
- Broker server load
- Exchange response times
- Device or software performance
Example – Impact of latency
Imagine Mr. A wants to buy 100 shares of ABC Ltd. at ₹100:
- He places a market order at exactly 10:00:00 AM.
- Due to latency, the order reaches the exchange at 10:00:02 AM.
- In those 2 seconds, the price rises to ₹100.05.
Result: Mr. A ends up paying ₹5 more than he expected due to the latency-induced delay.
What If...
Scenario | Explanation |
---|
I place a market order during volatility | Latency may cause you to get filled at a price higher/lower than what you saw. |
My internet or device is slow | This can increase latency and affect order execution quality. |
I want better price control | Use limit orders instead of market orders to avoid slippage from latency. |
To reduce latency, ensure a stable internet connection, use updated trading software, and consider placing limit orders when precision matters.
Last updated: 28 Jun 2025
Related Articles
What is latency in trading?
Latency in trading refers to the delay between when a trader places an order and when that order is actually executed on the exchange. Even small delays—measured in milliseconds—can significantly affect the outcome of trades, especially during ...
Why is latency important in trading?
Latency plays a crucial role in trading because it determines how quickly your orders are executed in a fast-moving market. The lower the latency, the quicker your order reaches the exchange—giving you a better chance to trade at your intended price ...
What is the latency in FYERS for order placements?
At FYERS, order placement latency is optimised to be under 50 milliseconds, providing a fast and reliable trading experience across both retail and algorithmic trading environments. This ensures that your orders reach the exchange quickly, reducing ...
How does FYERS ensure low latency for its customers?
At FYERS, we are committed to providing a seamless and responsive trading experience. Minimising latency is central to that goal. We use advanced infrastructure, optimised systems, and real-time performance enhancements to ensure fast, reliable order ...
What does 'X' settlement or cash settlement mean in trading?
In the trading world, “settlement” refers to the process of transferring securities from seller to buyer after a trade. Most trades settle with the delivery of actual shares. But in some cases, such as failure of delivery, an 'X' or cash settlement ...