august slippage brutal.
made me appreciate chicago colocation. been worth every dollar.
the numbers #
colocation cost:
$450/month datacenter
$80/month connectivity
total: $530/month = $6,360/year
question:
worth it in summer?
slippage comparison #
august with colo:
avg slippage: 2.8 ticks
14 trades × 2.8 ticks × $12.50 = $490 slippage cost
estimated without colo:
avg slippage would be: 4.2 ticks (based on home testing)
14 trades × 4.2 ticks × $12.50 = $735 slippage cost
savings: $245 this month
annual analysis #
normal months (volume good):
with colo: 1.7 ticks avg
without colo: 2.8 ticks avg
8 trades/week × 4 weeks = 32 trades/month
monthly savings: 32 × 1.1 ticks × $12.50 = $440
summer months (volume terrible):
with colo: 2.8 ticks avg
without colo: 4.2 ticks avg
3.5 trades/week × 4 weeks = 14 trades/month
monthly savings: 14 × 1.4 ticks × $12.50 = $245
annual calculation:
9 normal months: $440 × 9 = $3,960
3 summer months: $245 × 3 = $735
total annual savings: $4,695
colo cost: $6,360/year
net cost: -$1,665/year
still worth it?
the intangible benefits #
execution quality:
cleaner fills even in august.
less slippage variance.
psychological:
knowing setup is optimal.
removes excuse “my connection sucks.”
opportunity:
can trade strategies requiring tighter execution.
scalping becomes viable (not doing it yet).
competitive edge:
retail traders without colo at disadvantage.
home setup comparison #
home internet:
Ubiquiti 10Gbe to ISP
1.2Gbps symmetrical fiber
ping to chicago: 28ms
seems good but:
ISP routing not optimized.
shared infrastructure.
consumer-grade reliability.
chicago colo:
dedicated server in datacenter.
1ms to exchanges.
optimized routing.
enterprise reliability.
difference matters.
when colo matters most #
high volume conditions:
tight spreads.
fast fills.
small slippage edge = big difference.
example april 2024:
53 trades × 0.5 tick improvement = 26.5 ticks saved
26.5 × $12.50 = $331 saved vs without colo
low volume conditions (august):
wide spreads already.
fills slower anyway.
colo helps but less dramatic.
example august 2024:
14 trades × 1.4 tick improvement = 19.6 ticks saved
19.6 × $12.50 = $245 saved
but:
without colo, might not trade at all in august.
slippage would kill edge completely.
cost per trade analysis #
2024 ytd:
190 trades through august.
colo cost ytd: $530 × 8 = $4,240
cost per trade: $22.32
slippage savings per trade:
normal months: 1.1 ticks × $12.50 = $13.75
summer months: 1.4 ticks × $12.50 = $17.50
average savings: ~$15/trade
net cost per trade: $22.32 - $15 = $7.32
worth paying $7.32/trade for:
better execution.
competitive edge.
psychological confidence.
yes.
alternative considered #
cloud vps near exchanges:
$200-300/month.
shared hardware.
less control.
vs dedicated colo:
more expensive ($530/month).
dedicated hardware.
full control.
decision:
colo worth premium for control + performance.
what if i scaled up #
current: $1,500 position size, ~8 trades/week normal.
if scaled to $3,000 positions:
slippage impact doubles.
colo savings double to ~$30/trade.
annual savings: $9,390
vs colo cost: $6,360
net benefit: +$3,030/year
at $5,000 positions:
annual savings: $15,650
net benefit: +$9,290/year
scalability matters.
august reality check #
august alone:
colo cost: $530
slippage savings: $245
net cost: -$285
but:
without colo, august slippage would be 4.2 ticks avg.
might not trade at all (edge completely gone).
preservation value:
being able to trade profitably in august = priceless.
decision: keeping colo #
reasons:
-
annual net cost only $1,665 (manageable)
-
execution quality matters
-
psychological edge significant
-
enables future scaling
-
august would be untradeable without it
$138/month net cost after savings.
worth it.
infrastructure priorities #
current:
chicago colo: $530/month ✓
san diego servers: owned outright ✓
ubiquiti networking: owned outright ✓
next upgrades (eventually):
backup colo location (redundancy)
faster development workstation
better monitoring infrastructure
but:
current setup working.
not broken, don’t fix.
tonight (august 8, 4:15am) #
chicago colo cost analysis.
annual cost: $6,360
annual slippage savings: $4,695
net cost: $1,665/year ($138/month)
august savings: $245 (vs $735 without colo)
worth it: yes.
execution quality + psychological edge + scalability > cost.
without colo: august untradeable.
keeping it.
4:15am thursday. chicago colocation cost analysis. annual cost $6,360, slippage savings $4,695 = net $1,665/year cost. august savings $245 (2.8 ticks vs 4.2 without colo). worth $138/month for execution quality + competitive edge + scalability. without colo: august slippage would kill edge completely. decision: keeping it.
-AK