[Development Log] A physical constraint called latency. The reason VPS selection affects the reproducibility of the logic

No matter how much the superiority of the logic is verified, whether that superiority can be reproduced in actual operation depends on other physical constraints. This time I would like to record the representative factor "latency" and the selection of VPS (virtual private server) that influences it. It is a variable that is not related to the internal structure of the entry logic, yet it is a subtle but essential factor that greatly affects the success or failure of real-world operation. Like the spread, slippage, and anomaly detection previously recorded, it is positioned as a risk factor that exists outside the logic core.

1. Latency, a variable outside the logic

Latency refers to the communication delay that occurs from placing an order to its execution. From the moment an EA issues an order instruction to when it reaches the broker's server and is processed/executed, there is inevitably a time gap. This time gap is a very short delay measured in milliseconds, but as the market undergoes rapid changes, prices can move significantly within that brief period.

This delay occurs independently of the quality of the logic design; it is a purely physical/network constraint. No matter how sophisticated the entry logic is, this latency cannot be reduced to zero, and in that sense latency is an unavoidable source of noise in any EA operation. Unless this variable is explicitly handled during the validation phase, it is not possible to accurately estimate reproducibility in actual operation.

2. The latency structure created by the physical distance of the VPS

The main factor that determines the magnitude of latency is the physical distance between the VPS location and the broker's server. Data is transmitted at speeds close to the speed of light, but as the geographic distance increases, the number of network devices involved grows, and transmission delay accumulates.

Many brokers have servers located in financial hubs such as London, New York, and Tokyo. Placing the VPS in the same or a nearby data center as these servers can physically minimize latency. Conversely, if the VPS is placed in a geographically distant location, no matter how high-spec the environment is, this physical delay factor cannot be eliminated. Software-side optimizations have their limits, and this issue ultimately boils down to hardware and network routing.

3. The gap between verification and actual operation caused by latency

In high-latency environments, the market can move between order placement and execution, making slippage more likely where the executed price differs from the expected price. This is directly linked to the issues of spread and slippage previously recorded.

In backtest environments, this delay factor is usually not included or is handled with simplified models, leading to a non-negligible gap between expected values in validation and actual performance in operation. Even if the logic itself has no defects, latency as an environmental factor can prevent the expected superiority from being realized in practice. If this gap is misidentified as a "logic problem," there is a risk of overlooking infrastructure issues that should be addressed and spending time modifying the logic instead.

4. Differences in resilience by logic type

The impact of latency varies greatly with the trading style of the logic. Scalping-type logic, which has a small per-trade profit, is highly sensitive to small delays, making its latency resilience extremely low.

On the other hand, swing-type logic that captures longer-term trends has larger per-trade profits, so the relative impact of the same latency is smaller. In other words, the priority of the cost to invest in VPS selection changes depending on the design philosophy of the logic. When commercializing scalping-type logic, latency validation should be treated on par with entry logic validation, and validation reports that neglect this point cannot guarantee reproducibility in actual operation.

5. Technical checkpoints in VPS selection

In VPS selection, in addition to the physical distance to the broker server, the following elements must be checked. Prioritizing distance while neglecting specs and stability may lead to performance degradation due to other factors.

• Are the CPU and memory specs sufficient for the number of EAs to run and the processing load?
• Is the uptime (SLA) high and is stable operation guaranteed?
• Is there a solid support system in place in case of failures?

Insufficient specs can create new latency at a layer separate from physical distance, so choosing based only on price can lead to unexpected performance degradation.

Why Semura Lab. includes latency as a verification item

At Semura Lab., in addition to verifying the superiority of the logic itself, we treat environmental factors like latency as variables that cannot be ignored when considering how well they reproduce in real operation. No matter how excellent backtest figures are, if the real-world physical conditions are not in place, those figures cannot be reproduced. Our consistent position is that logic verification and the environment that runs it should not be considered separately. In this development log, we will continue to honestly record such environmental factors.