Monday, 23 July 2012

Why Use A Vitual Private Server

I've had some more emails asking about the benefits of a VPS (virtual private server).

Firstly, let's define what a VPS is:  a VPS is like a Windows computer running inside another server in a data centre. It's "virtual" because the computer - the VPS - is NOT running on its own hardware but sharing the hardware with other VPSs.

What does that mean? It means that if the company you are renting your VPS from puts too many VPSs on the same host (hardware) then your VPS will be slow. Now, the least important part of the hardware is the CPU. My own local CPU is a quad core CPU and rarely runs at even 15% of its capacity. That means, as far as the CPU is concerned, I can easily accommodate 8 VPS using that same CPU.

Now, the next thing and the important one is RAM - memory. This is where all the processing happens in our trading. Most VPS use Windows Server software so there is not a lot of rubbish loaded into memory like on your home PC. Typically, 2Gb of RAM is plenty. Even 1Gb may be enough if you are only running a couple of charts.

There are various VPS software solutions available. Most of them allow the host to over sell the RAM. The one that does NOT is Microsoft Hyper-V so that is the one to ensure that your VPS host uses.

But why use a VPS?

If you run an algo, it's much quicker if your VPS is co-located at or near to the broker/exchange. If you are trading manually, then any Internet outages will not cut your broker interface off from the market - stops that have been entered will still be in force. If you lose Internet connectivity then your charts will not be accurate when the feed resumes. You can also access your VPS from anywhere - holidays, on the road - even from an ipad or smart phone.

I've been doing surveys of different VPS providers and there is quite a large spread of prices and qualities in VPS. There seem to be more people entering this market. Finding one that balances price, performance and availability is what needs to be done. Pricing has come down as more people enter the hosting business.

Don't confuse a web host such as GoDaddy with a provider of VPS for trading.

The goal is to get a 2ms ping to where your orders get processed. If you are in Australia, your ping from a local PC to the order processing can be as much as 250ms. In Europe we have about 75ms and California can easily be 50ms or more. Like anything these days, do your due diligence and educate yourself before you buy.

Today's chart is Flo autotrading the DAX. There were just two trades in the morning, London time. Hard to keep focused for manual trading when the trades per the trading plan are so far apart in time. But Flo has 100% focus and doesn't get tired. I draw your attention to July 7th when there was a 823.50 Euro loss. Happens and is part of the biz, but I have designed the algo for a high win rate. Numbers include commissions and all entries are based on limit orders. For back testing, price has to go through the limit price by at least one tick or there is no fill. Limit orders mitigate entry slippage.


  1. Thanks for bringing up the issue of VPS. Have you got specific recommendation for a VPS service provider if you trade ES actively?

    When you rent a VPS, does it allow you to put a USB into the computer? I asked this because I have software which requires USB key plug into the PC to run.

    Thanks a lot!

  2. Anon 21:36, If your USB is a security dongle then you will probably have an issue. I would ask the provider of the software to give you an alternative solution. USB security is stone age and there are other just as secure methods around now. All the VPS providers have pluses and minuses - cost, size and support service - you'll need to find the balance of what you want to pay for what you get.

  3. Thanks for your feedback.