Trading Latency Explained: Why Milliseconds Cost You Money

What Is Trading Latency?

In trading, latency is the total time it takes for your order to travel from your trading platform to the exchange's matching engine, get processed, and for the confirmation to come back. It's measured in milliseconds (ms) — thousandths of a second.

When you click "Buy" in NinjaTrader or your Expert Advisor fires a market order, that order must travel through your network connection, across the internet (or a private network), to your broker's gateway server, then to the exchange. Each hop adds time. The total round-trip time determines how quickly your order reaches the order book and whether you get filled at the price you see — or a worse one.

The Components of Latency

Total latency is the sum of several components:

• Network latency: The physical time for data to travel across fiber optic cables. Light in fiber travels about 200km per millisecond. New York to Chicago is roughly 1,200km of fiber — that's 6ms one way at the speed of light, and real-world routing adds overhead. From your home, add your ISP's last-mile connection (cable, fiber, or DSL) plus multiple routing hops.
• Processing latency: The time your trading platform takes to generate the order message and the time the exchange takes to process it. Well-optimized platforms add microseconds; bloated ones can add milliseconds.
• Broker gateway latency: If your order goes through a broker's server before reaching the exchange, that server adds processing time. Direct market access (DMA) brokers minimize this.
• Jitter: The variation in latency from one order to the next. A connection that averages 40ms but spikes to 200ms during market opens is worse than a consistent 50ms connection. Jitter makes execution unpredictable.

Real-World Latency Numbers

These are representative round-trip times for sending an order to the CME (futures) or a major forex broker:

Connection Type	Round-Trip Latency	Notes
Co-located VPS (same building as exchange)	<1ms	Best possible. Used by prop firms and serious algo traders
Same-city VPS (e.g., NYC for NY4)	1–5ms	Excellent. Minimal practical difference from co-located for retail
US home connection (same coast)	15–35ms	Acceptable for discretionary trading
US home connection (cross-country)	40–70ms	Noticeable slippage on fast moves
International (Europe to US exchange)	80–120ms	Significant disadvantage for active trading
Mobile / WiFi connection	100–300ms+	Unreliable. Never use for live execution

How Latency Costs You Money

Latency creates two specific costs:

1. Slippage on market orders. When you send a market order, you're filled at whatever price is available when your order arrives at the exchange. If the market is moving and your order takes 50ms to arrive, the price may have moved against you by the time it gets there. On ES futures, a single tick of slippage costs $12.50 per contract. If you average 0.5 ticks of slippage per trade and make 10 trades per day, that's $62.50/day — $1,250/month — in slippage alone.

2. Stale stop orders. Stop-loss orders sit on the exchange (or at your broker) and trigger when price hits a level. But if your strategy uses client-side stops (common with EAs and NinjaScript strategies), the stop is managed by your platform. When price hits your stop level, your platform must send a market order. The slower that order travels, the further past your stop you get filled. On a fast move with 50ms latency, you might get filled 2–3 ticks past your stop level. At $12.50/tick on ES, that's $25–37.50 of additional loss per stopped-out trade.

The Slippage Math Over Time

Let's quantify the impact for a typical active trader:

Scenario	Avg Slippage/Trade	Trades/Month	Monthly Cost
Home PC, ES futures, 1 contract	0.5 ticks ($6.25)	200	$1,250
Co-located VPS, ES futures, 1 contract	0.1 ticks ($1.25)	200	$250
Savings from VPS			$1,000/month

A VPS costing $50/month that saves $1,000/month in slippage is a 20x return on investment. This is why every serious prop firm trader and institutional algo desk uses co-located infrastructure.

Do You Actually Need Sub-Millisecond Latency?

Probably not — and that's fine. Sub-millisecond latency matters for high-frequency trading (HFT) firms that are competing for queue priority at the microsecond level. As a retail trader, the difference between 0.5ms and 5ms is irrelevant to your execution quality.

What matters for retail traders is the difference between 50ms (home connection) and 5ms (co-located VPS). That's a 10x improvement that directly translates to better fills, tighter stop execution, and more reliable order management. You don't need to be in the same rack as the exchange — you just need to be in the same building or campus.

How to Measure Your Current Latency

• NinjaTrader: Open the Control Center > Connections tab. Your round-trip time to the broker is displayed. During market hours, note both the average and the spikes.
• MetaTrader: Bottom-right corner of the platform shows ping in milliseconds. Right-click the connection indicator for detailed stats.
• Command line: Open a terminal and ping your broker's server IP. While this doesn't capture application-level latency, it gives you the network baseline. Use ping -n 100 [broker_server_ip] on Windows to get a meaningful sample.
• Rithmic R | Trader: If you use Rithmic as your data feed/order routing, Rithmic R | Trader shows detailed latency statistics including exchange-level round-trip times.

The VPS Solution

A properly chosen trading VPS co-located at the relevant exchange datacenter (Equinix NY4 for US equities/forex, CME datacenter in Chicago for futures) eliminates the largest component of retail trading latency: the network distance between your home and the exchange.

FinTechVPS servers are co-located at Equinix facilities with dedicated CPU cores, NVMe storage, and 10Gbps network connectivity. Your orders travel feet, not miles. View our plans and start trading with sub-millisecond execution.