Forex and Latency: a very special relationship. It is possible to act on latency to improve your earnings. How? By decreasing it, of course. The most effective method is to use
Forex VPS. Here is some specific info about it.
What is latency
Latency is a term widely used in computer science. It is defined as the period of time that elapses between a command and its execution. In Forex, therefore, latency is the time that elapses between the trader's order and its execution by the broker's server. This leads to a small but important truth: execution does not happen immediately, instantly. Latency is measured in milliseconds. One thousand milliseconds - mathematics is not an opinion - make up a second.
How latency affects Forex Trading
Why is latency so important in Forex Trading? The reason is simple: latency, if excessive, can cause capital loss. In fact, in the period that elapses between the order and its execution, the price can change, shuffling the cards on the table and making the order obsolete. This, to be clear, does not always happen. Also because price changes during latency do not prejudice the goodness of the single operation. Except in two cases: if the change is considerable instead of minimal; if the trader is operating with an approach based on scalping, i.e. fast trading.
The risk that the price variation is significant, and therefore potentially a source of trouble from a financial point of view, remains high. Also because non-professional traders, who for the record use market maker brokers instead of ECN, suffer from a very high average latency. We are talking about 800 milliseconds, therefore a latency that is even perceptible by human senses.
There is a way to solve this problem without changing your trading style, without perhaps venturing into the use of ECNs (which are rather difficult). The solution lies in
Forex VPS, that is, in Virtual Private Servers. Some companies provide specialized servers for traders, which provide optimal guarantees in terms of stability and, above all, latency. A trader who relies on Forex VPS will no longer suffer the consequences of latency, since it decreases. Installing a Forex VPS is simple, the service is designed especially for average traders, it is tailored to them.
