Why it matters
Latency is invisible slippage. When markets move faster than your latency, your fills become a different distribution than your signals were designed for.
Operational use: this is how the market taxes urgency. When it appears, slow down or size down.
Common trap
Trading speed-sensitive setups (news, breakouts, scalp entries) without measuring end-to-end latency and fill quality.
Example
Your strategy assumes entry near breakout. With 250 ms of latency during spikes, you consistently enter after the move, turning ‘momentum’ into ‘late liquidity’.
Operational cue: if you can’t point to it on the chart, in the DOM, or in your broker logs, treat it as a story and trade smaller.
Notes
Quick rule
- If you see this repeatedly, you are in a different regime than your model assumes.
- Regime change usually means position size change.
- When in doubt: trade smaller, or don’t trade.