High-frequency trading also known as HFT is highly dependent on super fast trade execution. In hFT algorithms, trades are executed in milliseconds, much faster than any human being. A VPS or Virtual Private Server is a powerful solution that enables traders to run their trading algorithms 24/7 without the need for powerful computers and fast internet connections. HFT can also be empowered by VPS services to achieve necessary speeds with low latency, reliability, and security. Let’s expand a bit on the topic and break down how a VPS can enhance HFT strategies and whether it is feasible for your trading.
Ultra-low latency for split-second execution
When traders have a strategy for consistent profits, they can then proceed to plan their VPS solution and ensure uninterrupted trading activities. However, VPS won’t be that effective without a consistently profitable strategy. HFT strategies are costly and complex to develop and implement and require serious investment which is not easily available for everyone.
Some of the top-of-the-line VPS service providers host servers in data centers that are located near major financial exchanges like Chicago, New York, London, and so on.
Lower ping is crucial in a trading style where trades are executed in milliseconds and algorithms need to analyze the data and make trading decisions in a fraction of the time.
Premium VSP plans often provide non-shared 1Gbps connections with redundant pathways which enables HFT traders to deploy high-volume trading strategies. These servers typically are operated using powerful processors dedicated to server performance with large RAM and NVMe SSDs ensuring the fastest processing of market data and executing traders at superspeeds.
24/7 uptime and low latency with uninterrupted operation
VPS services are known for their zero downtime. VPS services almost guarantee 99.9% uptime, which ensures automated HFT algorithms run continuously, even during power outages or home internet issues. This is especially required for HFT algorithms that will not forgive even a 5-second of internet failures and might result in big losses.
Remote access and stability
Traders can access their platforms and manage HFT algorithms remotely from anywhere without the need for powerful computers. This enables users to monitor and adjust strategies globally using Remote Desktop Protocol (RDP), allowing superior flexibility without sacrificing performance.
For specific strategies like arbitrage, a stable and high-speed connection is a must. This is critical for HFT bots and Expert Advisors (EAs) which require non-stop operation to detect and exploit price inefficiencies.
Enhanced security and risk mitigation
VPS services that are enterprise-grade solutions have superior defense shields against cyberattacks like DDoS which eliminates the chances of disruption or leakage of sensitive data. They also provide data encryptions with secure protocols (HTTPS) and isolated server environments to prevent unauthorized access to HFT algorithms. Among advanced features, VPS services often allow snapshots and redundant storage to ensure strategy continuity even during hardware failure, which is crucial when deploying HFT algorithms.
Scalability for complex strategies
VPS services offer many services and allow traders to scale CPU cores, RAM, and storage as strategies grow. Traders might want to run multiple bots or backtest large datasets that require powerful computer resources. VPS services support multiple platforms including MetaTrader (4 & 5), NinjaTrader, and custom algorithms as well to ensure seamless integration of advanced HFT algorithms and tools.
The main reason why this is so important lies in the fact that HFT strategies are costly to develop and developers typically try to test many different approaches or train their AI models constantly, which requires them to use powerful computers. VPS services can be upgraded easily without large expenses which are typically related to HFT models.
Cost-effective solution
Faster execution with low latency minimizes price gaps between order placement and fulfillment which reduces slippage and maximizes profit potential. Increased potential profits per trade is super critical to reducing the average cost per trade. Trading requires commissions which can quickly eat up all the profits and reducing the slippage increases chances to catch larger movements and make more money which can severely affect the HFT bot’s profitability. Many VPS providers are competing in the market and pricing gets lower and lower while the quality of the services gets better. Even premium plans can be purchased at discounted prices, which is very flexible for start-ups trying to build profitable algorithms.
Advanced strategy implementation
A faster connection to financial exchanges allows HFT developers to build robots that can capitalize on the tiniest of price movements and take advantage of price inefficiencies using various methods of arbitrage strategies. Many VPS service providers have already started to allow AI model deployment like LSTM, for predictive trading. These advanced VPS services enable traders to run models on multiple asset classes like Forex, socks, and crypto with super low latency.
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