Production Notes
In production, latency arbitrage requires monitoring for API rate limits, database connection pooling, log rotation, alert thresholds, and automated restart procedures. Document runbooks for incident response.
Performance Metrics
Key metrics include Sharpe ratio, maximum drawdown, win rate, profit factor, and average trade duration. Compare against baseline strategies and adjust parameters based on out-of-sample results.
| Metric | Value | Benchmark |
|---|---|---|
| Sharpe Ratio | 1.85 | 1.20 |
| Max Drawdown | -12.4% | -18.0% |
| Win Rate | 58.2% | 52.0% |
| Profit Factor | 1.72 | 1.45 |
Core Concepts
Understanding latency arbitrage requires familiarity with market microstructure, order flow dynamics, and execution latency. The following sections detail each component.
Overview
This guide covers latency arbitrage implementation in automated trading systems. The approach combines established patterns with operational considerations drawn from production deployments.
Common Issues
Common issues with latency arbitrage include look-ahead bias in backtesting, overfitting to historical regimes, inadequate handling of exchange downtime, and insufficient logging for debugging.