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 volatile market conditions or for high-frequency strategies.
What causes latency?
- Internet/network speed: Slower connections increase the time it takes to send and receive order data.
- Server performance: If the trading platform’s or broker’s server is overloaded or inefficient, order processing is delayed.
- Exchange processing time: Each exchange has its own systems that introduce some processing lag.
- Geographical distance: Orders may take longer to reach exchanges if routed through data centres far from the trader’s location.
Example of latency in action
Imagine Mr. A places a market order to buy 100 shares of ABC Ltd. at ₹100 per share at exactly 10:00:00 am. Due to latency, the order reaches the exchange at 10:00:02 am. In that 2-second gap, the price rises to ₹100.05 per share. Mr. A ends up paying ₹10,005 instead of ₹10,000—a ₹5 difference purely caused by latency.
What if...
| Scenario | What you should know |
|---|
| You are using a mobile network or slow internet | You may experience higher latency; switch to high-speed broadband or wired connections. |
| You're trading during peak market hours | Exchanges and brokers experience heavier loads, which may introduce temporary latency. |
| You rely on algo or scalping strategies | Even small latency differences can materially impact your trade outcomes. |
Last updated: 19 Jun 2025
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