Trading with Virtual Private Servers (VPS)

Read our guide to virtual private servers and learn how you can use them to securely and effectively execute your trades.

25 June 2024

Virtual private servers
  • A Virtual Private Server (VPS) is a virtual environment hosted on a physical server, which is operated by a third-party service provider

  • VPS offer a range of benefits for traders, including reduced latency and improved access and security

  • Incorporating VPS is crucial for fast-paced trading strategies, such as high-frequency trading, algorithmic trading and scalping

  • Responsive support, customisation and transparent pricing are things traders should consider when choosing a VPS

What is a Virtual Private Server?

A VPS is essentially a virtualised server hosted on physical server infrastructure, typically maintained by a third-party service provider. It operates its own copy of an operating system (OS), granting traders an opportunity to run their MetaTrader 4 and MetaTrader 5 trading platforms at enhanced speeds.

In the fast-paced world of contract for difference (CFD) trading, where split-second decisions can make or break a trade, traders are constantly seeking technological solutions to gain an edge in the market as well as scale their trading operations.

As CFD trading relies heavily on real-time data analysis and rapid trade execution, the importance of a stable and high-speed internet connection cannot be overstated. However, relying solely on personal devices or home-based internet connections may introduce latency issues and increase the risk of missed trading opportunities.

This is where Virtual Private Servers (VPS) come into play. Virtual Private Servers have emerged as a critical tool for streamlining trading operations and optimising performance, as well as running trading systems for trade executions without interruption and downtime.

The role of VPS in CFD trading

Let’s explore a bit further the importance of VPS for CFD traders and how using these servers can improve the accessibility, security, and optimisation of your trades.

Reduced latency

In trading, latency refers to the time delay between an order being placed by a trader and its execution. VPS hosting significantly reduces latency by locating servers close to financial markets' trading servers. This proximity ensures that trade orders are executed swiftly, minimising slippage, and maximising the chances of favourable trade outcomes.

Increased accessibility

VPS hosting allows traders to access their trading platforms and execute trades from anywhere at any time, even when their personal devices are offline.

Enhanced security

VPS hosting providers implement robust security measures to safeguard traders' data and transactions from unauthorised access or cyber threats. This includes encryption protocols, firewalls, and regular security audits, ensuring the integrity and confidentiality of trading activities.

Risk management and trade automation

VPS enables traders to implement automated risk management processes, such as stop loss orders and take profit levels, directly into their trading platforms. This reduces emotional decision-making and ensures disciplined adherence to trading plans, even during volatile market conditions.

Backtesting and strategy optimisation

VPS hosting provides traders with the resources needed to conduct comprehensive back-testing of trading strategies. By simulating historical market data and analysing performance metrics, traders can fine-tune their strategies and identify optimal parameters for real-time trading.

Trading strategies that benefit from VPS

While all forms of CFD trading can benefit from utilising a VPS, certain trading strategies and activities particularly rely on its capabilities.

High-frequency trading (HFT): HFT algorithms execute numerous trades within fractions of a second, demanding ultra-low latency provided by VPS hosting.

Algorithmic trading: Automated trading systems, which execute pre-defined algorithms based on market conditions, require continuous connectivity and reliable performance, both of which are facilitated by VPS hosting.

Scalping: Scalpers aim to profit from small price movements by entering and exiting trades rapidly. VPS hosting ensures that their orders are executed swiftly and without delays.

Multi-platform trading: Traders who utilise multiple trading platforms as well as numerous trading accounts simultaneously benefit from VPS hosting, as it enables seamless integration and execution across different platforms. This is because slippage tends to arise whenever trade execution speeds are low.

Must-have VPS features for trading

When choosing a VPS, traders should consider several things to make the most of its related benefits.

Low latency and reliability: A good VPS ensures fast trade execution with minimal delays and reliable uptime for uninterrupted trading.

Robust security: Strong security features protect sensitive data and transactions from cyber threats and unauthorised access. It’s vital that traders request their broker to suggest a VPS that works well with their platform or check for reviews for VPSs and supported platforms.

Responsive support: Access to 24/7 technical support ensures prompt assistance with any issues or concerns. Timely resolution of connection issues as well as setting up the VPS infrastructure is very crucial.

Compatibility and customisation: The VPS should be compatible with popular trading platforms and allow for customisation to suit individual preferences.

Transparent pricing: Clear and transparent pricing structures helps to understand the costs and make informed decisions without hidden fees.