# Latency in Trading > Latency is the delay between a market event and your reaction to it. Learn the sources of trading latency, how it is measured and when it matters for your trades. Source: https://learn.tradelabsai.com/orders/latency-in-trading/ Track: Orders and Execution · Level: Intermediate · Updated: 2026-10-03 Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice. Cite as: TradeLabs Learn, "Latency in Trading", https://learn.tradelabsai.com/orders/latency-in-trading/ Latency is the time it takes for information or an order to travel between two points: from the exchange to your screen, from your click to the broker, or from the broker to the exchange's matching engine. In everyday life a delay of a tenth of a second is nothing. In trading, it can decide whether your limit order is first in line or last, and whether a quote you saw still exists when your order arrives. ## Where latency comes from | Source | Typical scale | Example | |---|---|---| | Your internet connection | Tens of milliseconds | Home Wi-Fi to the broker's servers | | Distance | About 1 millisecond per 200 km of fibre, one way | New York to Chicago is around 4 ms one way over the fastest routes | | Broker systems | Microseconds to milliseconds | Risk checks, routing logic | | Exchange processing | Microseconds | The matching engine and data feed | | Your platform | Milliseconds | Charting software redrawing the screen | | You | 200 milliseconds or more | Human reaction time | Light in fibre travels at roughly two thirds of its speed in a vacuum, about 200,000 km per second. That is why physical distance matters, and why trading firms pay for straighter fibre routes and microwave links between financial centres. ## Why latency matters ### Stale quotes The price on your screen is already in the past. In a fast market, by the time your market order arrives, the best price may have moved. This is one source of [Slippage](https://learn.tradelabsai.com/markets/slippage/). ### Queue position On price time priority exchanges, the first order at a price gets filled first. Faster participants get to the front of the queue. See [Fill Probability and Queue Position](https://learn.tradelabsai.com/orders/queue-position/) and [Matching Engines](https://learn.tradelabsai.com/orders/matching-engines/). ### Reacting to news When economic data or company news is released, firms with the lowest latency can trade on it within microseconds, long before any human reads the headline. **Example: A stale price** A futures contract is quoted at 5,210.25 / 5,210.50. A large sell order hits the market. Within 2 milliseconds the quote drops to 5,208.75 / 5,209.00. Your buy market order, sent from home with 60 milliseconds of latency, arrives after the drop and fills at 5,209.00, better than you expected this time, but in the other direction the same delay would cost you. You were trading on a picture that no longer existed. ## The latency race High frequency trading firms invest heavily to reduce latency: placing servers in the exchange's data centre ([Co-Location](https://learn.tradelabsai.com/infrastructure/co-location/)), using specialised network cards and kernel bypass software ([Kernel Bypass and Low-Latency Networking](https://learn.tradelabsai.com/infrastructure/kernel-bypass/)), programmable chips called FPGAs and microwave networks between cities. Advantages are measured in microseconds and even nanoseconds. See [High-Frequency Trading](https://learn.tradelabsai.com/algo-trading/high-frequency-trading/). Some exchanges push back with **speed bumps**, deliberate small delays that reduce the value of being slightly faster, and with batch auctions that match orders at intervals rather than continuously. ## Does latency matter for you? For most retail and swing traders, no, not in the sense of microseconds. You will never win a speed race against professional firms, and you do not need to. What matters for you: - **A stable connection and a reliable platform,** especially for stops and day trading. - **Using limit orders** so that stale quotes cannot cost you more than your limit price. - **Not trading in the first milliseconds after news,** where only the fastest participants have an edge. - **Choosing timeframes where latency is irrelevant,** such as hourly or daily charts. ## Measuring latency Professional firms measure latency at every step with precise timestamps, comparing when an exchange sent a message with when it was received and acted on. See [Exchange vs Receive Timestamps and Latency Measurement](https://learn.tradelabsai.com/programming/latency-measurement/) and [Clock Synchronization and PTP](https://learn.tradelabsai.com/infrastructure/clock-synchronization-and-ptp/). For retail traders, many platforms show a simple ping to the broker's servers. ## Frequently asked questions ### What is latency in trading? The delay between an event, such as a price change, and the moment you see it or your order reaches the market. ### What is low latency trading? Trading designed to minimise delays, using co-location, fast networks and specialised hardware. It is central to high frequency trading. ### Does internet speed affect trading? A stable, low latency connection helps reliability, but for most non professional traders, order type choice matters far more than milliseconds. ## Sources - Wikipedia, [Low latency (capital markets)](https://en.wikipedia.org/wiki/Low_latency_%28capital_markets%29) ## Continue learning - Next lesson: [Execution Reports and Trade Confirmations](https://learn.tradelabsai.com/orders/trade-confirmations/) - Previous lesson: [Direct Market Access and Sponsored Access](https://learn.tradelabsai.com/orders/direct-market-access/) - Related: [Direct Market Access and Sponsored Access](https://learn.tradelabsai.com/orders/direct-market-access/): Direct market access lets traders send orders straight to an exchange's order book through a broker's systems. Learn how DMA works, its benefits, costs and rules. - Related: [High-Frequency Trading](https://learn.tradelabsai.com/algo-trading/high-frequency-trading/): High frequency trading uses extreme speed to trade huge volumes for tiny profits per trade. Learn the main HFT strategies, the technology and the criticisms. - Related: [Co-Location](https://learn.tradelabsai.com/infrastructure/co-location/): Co location places trading servers inside or beside an exchange's data centre to cut latency. Learn how it works, what it costs, fairness rules and who needs it. - Related: [Matching Engines](https://learn.tradelabsai.com/orders/matching-engines/): A matching engine is the system that pairs buy and sell orders on an exchange. Learn price time priority, pro rata matching, auctions and why it matters to you. - Related: [Exchange vs Receive Timestamps and Latency Measurement](https://learn.tradelabsai.com/programming/latency-measurement/): How to measure latency in a trading system: where to timestamp, tick to trade and order round trip, percentiles instead of averages and how to find bottlenecks. - Related: [Kernel Bypass and Low-Latency Networking](https://learn.tradelabsai.com/infrastructure/kernel-bypass/): Kernel bypass lets trading software read network packets straight from the network card, skipping the operating system. Learn how it works and the trade offs. - Related: [Slippage](https://learn.tradelabsai.com/markets/slippage/): Slippage is the gap between the price you expect and the price you get. Learn what causes it, how to measure it and the practical ways to reduce slippage.