Latency ~ Execution Delay

Filed Under (Passing Thoughts) by Casey on 31-03-2010

I have been reading about this issue for quite sometime now but have never really put much though about it neither have I really taken it as an issue to consider.

It wasn’t until I started thinking more about this rebate strategy and also when I was replying to an email with regards to brokers.

Every traders wants to execute their trades quickly. There are only so many lots to offer at that price. And if everyone wants to trade at a particular price at a point in time, obviously the fastest one would get it. Will one pip make a big differences? Of course it would… I mean hey… every pip is $$$.

I have not study this in detail to really come up with a conclusion.

By logic, latency kills the any edge we have on a market with any automatic forex robot. It is probably this reason why backtesting and also demo trading is not a very clear representation of a good EA strategy. Backtesting itself execute on the closing minute of every tick, while demo trading assumes that the EA will trigger the trade at the price given by the demo server.

It could also be this reason why one EA will perform well with one broker but not with another broker.

When we trade live, our MT4 pings the server of the broker that executes the order, either they act as an intermediary (dealing desk) or they order goes directly onto another server that captures the price. If our MT4 pings the server slower… it would mean that our order will be in que from another order that might be a head of yours.

Does this makes sense?

I am sure it does.

But I still have yet to toy around with ECN type of account where it is said that your order goes directly to the market. I think if I do, then latency issue needs to be address.

Probably one of the reason why I did not bother about latency issues…

So my question would be will this latency issue give me a better edge on my current rebate strategy? Or is it just an issue that should not matter.

I am probably thinking this with all my scalping strategy in mind.

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