Order Execution Metrics
These metrics are essential for evaluating the technical efficiency of your trading system and the quality of your broker’s execution.
1. Average Latency per Order
Average Latency per Order is the average time taken for an order to be sent from the trading system to the exchange and receive confirmation or execution.
Calculation
The metric is derived from the time delta between the submission and the response: Latency = Order\ Confirmation\ Time - Order\ Submission\ Time
Why It Matters
- Faster Execution: Lower latency enables faster entries and exits.
- Critical for Specific Strategies: Essential for automated, intraday, and momentum strategies.
- Risk Mitigation: High latency may lead to missed trades or increased slippage.
- Processing Speed: Measures how quickly an order is processed and acknowledged after submission.
2. Slippage per Order
Slippage per Order is the difference between the expected order price and the actual execution price.
Calculation
Slippage = Executed\ Price - Expected\ Price
- Positive Slippage: Executed at a better price.
- Negative Slippage: Executed at a worse price.
Why It Matters
- PnL Impact: Directly impacts profit and loss.
- Market Sensitivity: Common in high volatility or low liquidity conditions.
- Order Type: More frequent with market orders.
- Execution Impact: Shows the price impact experienced during order execution.
Comparison Summary
| Metric | Focus | Primary Goal |
|---|---|---|
| Latency | Speed / Time | Minimize time to confirmation. |
| Slippage | Price / Accuracy | Minimize the gap between expected and filled price. |
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