13 September 2021
When it comes to trading across a range of different assets, low latency is crucial. This is particularly important with regards to trading forex. Forex trade execution needs to be agile and responsive. A trader must be able to access critical market information to inform a decision. That decision needs to be implemented quickly if the market information isn't to become rapidly outdated.
Let's look at what forex trading is and why low latency is such a vital component of the trading architecture related to this particular asset.
The word forex derives from foreign currency and exchange. Forex, or foreign exchange, is the process by which one currency is exchanged for another. It can be done for a variety of reasons, including for trade and travel.
Forex trading refers to the buying and selling of different currencies to make a profit. Traders achieve this through intelligent tracking of the foreign currency markets and swift trade execution. You may, for instance, sell a currency that is currently valued higher than its recent average and then purchase another currency that is priced towards the bottom of its current range. The hope would then be that the currency would increase in value, perhaps back to its recent average value, or higher, at which point you may then choose to sell and maximise your gains.
Another strategy is to take advantage of an interest rate differential between the two currencies.
One of the key differences between forex and other forms of trading, such as equities, is that there is no central marketplace where foreign currency exchange takes place in international forex markets. Instead, trading is carried out electronically over the counter. This means that the best execution takes place between traders across computer networks.
The market is essentially open 24-hours a day, with currencies traded across every time zone - meaning that when trade execution stops in London, it's underway in other parts of the world. This makes currency trading incredibly dynamic and quick-moving, and as a result, traders need to be able to respond quickly to market information.
Any serious forex trader will look for a broker that uses trading systems that can guarantee a low latency rate. Some of the critical infrastructure required for low latency forex trading relates to connectivity. The broker should have efficient and reliable communications access to different exchanges. This ensures that traders have access to the critical transactional information they need to make a decision.
Any delay can, and frequently does, change the entire trajectory of the trade execution, including the outcome. Delays will compromise the value of any market information.
Low latency gives forex traders a competitive advantage. It allows them to make smarter decisions based on accurate information, which they implement quickly to provide the maximum opportunity for a successful outcome.
At Global Investment Strategy, we understand the unique requirements of forex traders. We have the knowledge and global reach to help you achieve your trading objectives. Our technology-led approach means that our clients have access to any innovations helping traders achieve timely trading results.
We understand the importance of trade execution at Global Investment Strategy and go the extra mile to the extra mile to ensure industry-leading low latency levels.