Delay costs are defined as?

Delay costs refer to the cost incurred from price movements that occur between the time an order is placed and the time the order is executed. This concept is particularly relevant in trading scenarios where an order may not be executed immediately due to various factors, such as market volatility or liquidity constraints. The longer the delay in execution, the higher the potential for price changes, which can adversely impact the intended investment strategy or profitability.

When an order is not filled promptly, the trader or investor may face different prices than anticipated once the order is executed. This discrepancy can lead to a situation where the trader is forced to buy at a higher price or sell at a lower price than if the order had been filled immediately. Thus, the closed-to-close price movement that occurs during this period is a crucial component of delay costs, as it directly affects the final outcome of the trade.

Understanding delay costs is essential for traders in managing execution risks and optimizing trading strategies, particularly in fast-moving markets.