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Latency glossary · Slippage

Latency vs Slippage: How They Relate and Why Both Matter

Latency and slippage are often confused or used interchangeably. They are not the same thing — but they are directly connected. Understanding how one causes the other is essential for diagnosing execution quality problems.

TL;DR

Latency is the travel time of your order (measured in milliseconds). Slippage is the price gap between your expected fill and your actual fill (measured in pips). Latency does not always cause slippage — in slow markets, even high-latency orders fill near the requested price. But in fast markets, high latency guarantees slippage because the price moves during transit.

See the plansSlippage during news events
Latency
Round-trip time from your platform to the broker's matching engine.
Slippage
The price gap between your requested level and your actual fill.
Connection
High latency in fast markets = predictable slippage. Low latency = slippage risk reduction.

What latency is (for traders)

Latency is the time an order takes to travel from MT4 to the broker's matching engine and back. It is measured as round-trip time (RTT) in milliseconds. A 50ms RTT means 25ms each way — the broker sees your order 25ms after you send it. This is the window in which the market can move before your order is processed. The critical insight is that latency is not optional; it is inherent in every network connection. Even a direct, wired connection to a broker server 50 kilometers away has measurable latency. Understanding your baseline is the first step to improving execution.

What slippage is

Slippage is the difference between the price at which you intended to trade and the price at which your order actually filled. If you click Buy EUR/USD at 1.0850 and fill at 1.0853, you have 0.3 pip of slippage. Slippage can be positive (you fill at a better price) or negative (worse). In practice, negative slippage is more common during fast markets and news events. Slippage is a visible, measurable cost — and it is what traders ultimately care about because it directly impacts the P&L of every trade.

How latency causes slippage

The mechanism is straightforward: (1) You send an order at price X. (2) The order travels to the broker — taking L milliseconds. (3) The price moves from X to X+? during those L milliseconds. (4) The broker fills you at the best available price — which may be X+?. The larger L (latency) and the faster the market moves, the larger ? (slippage). For example, if EUR/USD is moving at 1 pip per 100 milliseconds during an active session, and your latency is 200ms, the price can move approximately 2 pips in the time your order is in transit. You are not guaranteed to suffer all of that as slippage (the broker's execution speed and liquidity help), but the risk is real. See slippage during news for detailed examples.

When latency causes slippage and when it doesn't

In slow markets (e.g., Asian session on a calm day), a 200ms RTT might produce zero slippage because the price doesn't move in 200ms. In fast markets (e.g., NFP release, FOMC statement), a 10ms RTT can still produce 0.5 pip slippage because the price is moving 5 pips per second. Latency and slippage are coupled by market speed — not just by the latency number alone. This is why a trader with 200ms latency might get clean fills during slow US afternoon sessions but terrible fills during Asian overlap or economic data releases. The same connection is either invisible or brutal depending on what is happening in the market.

How reducing latency reduces slippage risk

Reducing RTT from 200ms to 10ms shortens the transit window by 190ms. In a market moving 1 pip per 100ms, that saves approximately 1.9 pips of exposure. The benefit is proportional to how fast your instrument moves. For scalpers in fast markets, this is significant. For swing traders, it is irrelevant. The key insight is that lowering latency is a lever you control. You cannot control how fast the market moves, but you can control the path your orders take. TradersProxy nodes co-located at broker DCs reduce the transit window to 2–8ms, regardless of your physical location. Setup is covered in MT4 SOCKS5 setup on Windows. The latency-reduction math scales with your trading style: scalpers see the largest benefit, but all traders benefit from improved predictability.

Execution Quality

Less time in transit = less price movement before the fill.

TradersProxy nodes co-located at broker DCs reduce the transit window to 2–8ms. Less transit means less market movement before your order fills.

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FAQ

Brokers measure 'execution speed' from the moment they receive your order to when they fill it. That excludes your network latency. Their execution speed might be 50ms; your network latency might add 200ms on top. Total time-to-fill is what matters for your fill quality.

Yes. 'Positive slippage' means you filled at a better price than requested. This happens when the price moves favourably during transit. Whether brokers pass positive slippage to clients depends on their execution policy.

No. The bid-ask spread is set by the broker and liquidity providers. Latency affects where within the spread (or outside it) you fill — it does not change the spread itself.

No. Slippage = you get filled, but at a different price. Requotes = the broker refuses to fill your order at the requested price and asks if you accept the new price. Both are consequences of latency in fast markets.

Keep a trade log with your intended entry price and your actual fill price for every trade. Over 50+ trades, calculate the average difference. This is your average slippage. Breaking it down by market session and news events shows where it is worst.