4 Reasons Why You Should Use a VPS for Forex Trading
Hands up, anyone who knows what VPS stands for!
That’s right, VPS means “virtual private server.” You can think of a VPS as a computer located in a purpose-built data center with other computers, with fast connection to the Internet. In fact one physical computer can house several virtual private servers at one time (hence the word “virtual”). Yet each VPS still has its own dedicated share of power and stability to run a particular application, like your trading software.
So what makes using a VPS a better way to trade on Forex?
In four words: accessibility, flexibility, security and speed. You may be thinking that you can get all of that by connecting over the Internet to your broker’s system from your home PC. After all, isn’t that what the new digital era is all about?
Sure, but while you can certainly do a lot from your own computer, there are limitations:
- If you don’t take your PC with you, you can’t trade. With a notebook PC this may work, but a desktop PC is clearly out of the question. In this case, accept that you’ll be chained to your desk.
- If local power or Internet connection to your house or office fails, you can’t trade either. In some places, performance is shaky, to say the least. How does yours stack up?
- If you want to trade, then your PC has to be on. So if you’re running automated trading programs, you can look forward to clicks and whirrs day and night, and the need to reboot frequently (how does 3 o’clock in the morning grab you?)
- And here’s a big one – your PC will take longer to transmit your trading orders. Even a fraction of a second longer is enough for slippage, meaning orders being filled at prices that changed during the time it took for your order to reach your broker. Is that a problem? Let’s put it this way. Slippage of just 0.5 pips over 200 trades of standard lots will lose you $1,000. How likely is a home PC to cause slippage? 50% of the time. Ouch!
With a VPS, it’s different:
- You can trade from wherever you can find a PC (friend, Internet cafe, hotel…) and a network connection. Just connect to your VPS for Forex. With a centrally located VPS, your access to trading is literally worldwide.
- You can continue your trades throughout power outages, fires or floods because the data centers that house VPS systems are purpose-built to resist such catastrophes, with backup systems to take the strain in case of disaster.
- You can let your trades run automatically day and night, safe in the knowledge that a VPS runs more robust operating system software than simple PCs, and achieves longer periods of uptime (goes on working non-stop for longer periods).
- You can make more money from your trades thanks to less slippage. A VPS system transmits your trading orders faster using its additional processing power and higher speed Internet connections.
But enough of generalities – let’s see some real life examples.
Let’s say you are using the Metatrader interface with your broker, together with its “Expert Advisor” functionality. With this, you set your trades to happen automatically when certain market conditions and pricing levels happen. Of course, this is useless if your PC is switched off or your Internet connection goes down. On the other hand, a VPS is always on, always connected and always ready to trigger your EA actions as soon as the right market signals are given.
And the boost to your trading profits? To see why this is so, consider the factor of “latency” – this is the measure of the time it takes for systems to react and an order to be transmitted. Latency is measured in milliseconds. Slippage occurs when the latency of a system exceeds about 200 milliseconds. A home computer running the MT4 interface will often have latency of around 800 milliseconds. Trading through a VPS system located close to your broker’s offices can bring latency down to as low as 100 milliseconds and therefore under the “slippage barrier.” Do we need to say more?
While providers of virtual private servers (or virtual dedicated servers, a similar proposition) may vary in what they offer, as a general rule you get what you pay for. For a higher price, you can expect better system stability, more processing power and higher Internet access speeds. Lower-priced offerings can still work – just be sure that the specifications match your requirements.
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