How Does Latency Impact the Profitability of a High-Frequency Trading Strategy?

Latency is inversely proportional to the profitability of a high-frequency trading (HFT) strategy. HFT relies on executing trades milliseconds faster than competitors to capture fleeting arbitrage opportunities or react to market events.

Even a slight increase in network latency can cause an HFT bot to miss an opportunity or, worse, be front-run by a faster competitor, turning a potential profit into a loss due to failed or poor execution.