What Is a Virtual Private Server, and Do You Need One in Forex?

by FX EA Review
What Is a Virtual Private Server, and Do You Need One in Forex?

What is a virtual private server in forex, and is it necessary? A VPS is a virtual machine hosting a copy of a trader’s platform close to the servers of their broker, allowing for round a clock internet connection.

It’s a well-known principle trading forex that requires a consistently strong internet connection between the trading platform and a broker’s server. However, Murphy’s law – or that anything can go wrong – still exists in any operation.

Picture a trader who’s been eyeing scalping a high-impact US news announcement at the New York session open. Just as it gets to the crunch time when the data is released, and they place a position, their internet suddenly disconnects, resulting in a missed entry and potential lost profit.

As the majority of traders use their personal desk or laptops to execute most of their positions, a constant and strong internet signal is never guaranteed due to connection failures, virus attacks, and power cuts. 

To alleviate this problem, virtual private servers or VPSs have gained popularity in the forex industry. Virtualization is not just limited to web hosting; financial markets have also become proponents of this technology too.

A virtual private server is particularly pertinent for expert advisor traders who need their robots connected to the net 24/7. But is a virtual private server useful for other traders; how does it work? These questions and more will be covered in this article.

What is a virtual private server?

A virtual private server or VPS is a networked machine running or hosting a remotely operated copy of a trader’s platform. Without a VPS, traders ordinarily connect through multiple shared servers. Making it private establishes a more dedicated, round-the-clock connection to the trading application with very low or no latency. 

Although normal order execution occurs within milliseconds, some instances may result in slight delays. While these seem minuscule, they make a huge difference in where traders enter and close their orders.

Aside from ensuring orders are executed swiftly, a VPS helps one’s trading platform connect to the internet 24/7 even when their connection gets cut, or they experience a power blackout. Once a VPS is installed on their computer, it will run indefinitely for the specified time it is hosted.

Brokers provide this option through a third-party internet provider hosting their dedicated servers. Generally, unless a trader meets a specified high minimum deposit and trades a certain number of lots monthly, they can alternatively subscribe monthly from $5 to $100 on average (or yearly) with a chosen hosting service recommended by their broker.

How to choose the best VPS

Like any service, a few standards need to be met in the context of forex to ensure one selects the most suitable VPS.

  • Price: Most brokers commonly offer a free VPS but provided clients deposit a minimum deposit and meet a certain amount of traded lots monthly. These tend to be quite higher than the average. 

For instance, XM needs at least $5000 deposited with five lots traded in 30 days for a free VPS. The alternative is for traders paying monthly for their VPS, which may either be broker-recommended or from another provider.

It is ideal to select the cheapest plan, meeting only their bare minimum performance requirements, which will be covered next.

  • Performance: Nearly all good VPSs have 99.9% guaranteed uptime, meaning they very rarely experience any downtime. The second consideration is the operating system and trading platform supported in the server.

Thirdly, traders would need to consider the RAM of the VPS. Higher RAM always means faster processing speed, an attribute translating to even quicker trade execution. Packages with bigger RAM are more expensive. A safer choice is choosing either the lowest or second rate.

  • Location of the broker’s main server/s: To further reduce latency, it becomes crucial for users to verify the location of their broker’s server in relation to the area of the VPS. Brokers provide these addresses. The closer both servers are, the more reliable the connection becomes.

So, who really needs a virtual private server in forex?

Traders employing robots (expert advisors) are perhaps the group needing a virtual private server the most, but why is that? Unlike discretionary methods, automated trading happens through pre-coded installed programs on a trading platform.

Execution only requires an internet connection without the need for manual intervention. EAs were designed to conduct trades around the clock, and many of these often execute pretty frequently throughout the trading day. 

Using normal internet poses threats of intermittent connections where the different servers on the platform will refresh several times. These stop-starts are detrimental to a robot because it means lost trading opportunities, resulting in fewer executed orders and less potential profit overall.

Furthermore, without a VPS, someone using a robot would naturally need to be always online near their computers, which is a time-consuming endeavor.

Other traders who don’t utilize a VPS aren’t as plentiful but may find some benefits of this service since it allows robust and faster order execution, resulting in more precise entry and closing orders.

Final word

Investors with years of experience in the markets have succeeded by relying on their ordinary internet access alone through their brokers. However, this group might still consider VPS to ensure a stronger connection due to the close proximity between it and a broker’s data center.

Though many point to the general security benefits (which are largely trivial) of a VPS for any trader, this service is mainly necessary for those using robots or other automated trading strategies.

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