Latency is the delay in the time it takes for your trading platform (Eg. MT4) to interact with the Forex broker. The lower the delay in the request – response, the better it is for trading.
Large institutions and High Frequency Traders require trades to be executed in nano seconds and invest heavily on optimizing the trading conditions.
Retail traders in general do not need ultra low latency levels for their trading needs since most automated strategies operate on M1 or higher timeframe.
It is however, very important for the retail trader to optimize the trading conditions to provide for lowest possible latency at a reasonable cost. Retail traders in general should provide automated strategies with latency levels of less than 100 ms.
Optimal connectivity for trading platform cannot be achieved with all servers and ISPs. In order to improve trading results, it is important to choose VPS providers who deploy their infrastructure with internationally renowned providers like Equinix, Global Switch, Level3, and Internap.
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Click here for more information on the impact of latency on trading.