The importance of VPS in online currency trading
The adoption of automation on the financial markets has been revolutionary, both for retail traders and institutional investors.
The ease of access to the global currency market, coupled with the advancements made in algorithmic and high-frequency trading, have made way for unparalleled levels of liquidity, which motivates more and more individuals to try their hand at forex trading.
Algorithmic trading requires a very high speed of order execution, as it is usually done on very short time frames. For this reason, traders use virtual private servers, or VPS to make sure the connectivity is seamless.
Understanding how a VPS works can be important for any currency trader, as it ensures a stable access to the market and automated trade execution with minimal latency.
What is a VPS?
A virtual private server, or VPS, is a remotely hosted computer that is used to run automated trading strategies, Expert Advisors (EAs), and other trading applications without any interruptions.
A VPS provides a stable, high-speed, and secure environment for executing trades on a 24/7 basis, even when the trader’s personal computer is off.
Most major pieces of forex trading software support the use of VPS in automated trading, including MT4, MT5 and the cTrader platform, among others. This makes VPS services highly accessible to forex traders using algo trading strategies.
Why do traders use a VPS?
While automated trading can be conducted without a VPS, most traders engaged in HFT, tend to use a VPS, as it comes with several key features that elevate security for traders, such as:
- A VPS ensures that trades are not missed due to connectivity issues and internet disruptions
- Trading using a VPS continues even if power goes out
- VPS servers are typically located near broker data centers, which reduces latency to a minimum
- If your computer crashes, the VPS will continue running trades
These features mean that a VPS can ensure uninterrupted access to algorithmic trading strategies, regardless of the technical issues the trader may be facing. This allows stable returns in the long run, provided the algorithmic strategy in question is able to deliver positive returns.
How a VPS works – Step-by-step
In order to better understand how a VPS works and the advantages it brings, we can look at the process of acquiring a VPS service step by step.
Renting a VPS from a provider
Creating your own VPS is incredibly expensive, which means that most traders rent a VPS service from a provider that owns and operates the VPS near the broker data centers. Typically, a monthly or annual fee is charged and providers may have several payment packages, based on the computational power required by the client.
In some cases, brokers may provide free or discounted VPS to active and established traders.
Installing trading software on the VPS
Once you have rented a VPS, you can log in using the Remote Desktop Protocol to the trading platform of your choice – MetaTrader 4, MetaTrader 5, cTrader, or other platforms on the server.
Uploading and running trading bots
Once you have successfully logged into the VPS, you can configure Expert Advisors, custom scripts, or trading signals to run continuously on the VPS.
As we have already mentioned, unlike a standard computer, a VPS remains online on a 24/7 basis.
VPS executes trades automatically
Any time market conditions match the rules of the EAs, trades will be executed instantly. The low latency ensures that trades are executed near-instantaneously, with minimal slippage and improved performance.
Monitoring
While the VPS and EAs execute trades automatically, the role of the trader is not diminished, as the returns generated by these trades, as well as their frequency, need to be monitored to ensure optimal performance.
I’m a DevOps/SRE/DevSecOps/Cloud Expert passionate about sharing knowledge and experiences. I am working at Cotocus. I blog tech insights at DevOps School, travel stories at Holiday Landmark, stock market tips at Stocks Mantra, health and fitness guidance at My Medic Plus, product reviews at I reviewed , and SEO strategies at Wizbrand.
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