What is a Forex VPS?

A “Virtual Private Server” or VPS for short, is a method of web hosting which uses a data center facility to enable businesses to locate physical hardware so as to provide a direct ISP connection. In the forex market, forex VPS are data centres or professional computer-server facilities that are provided to enable trading entities host their trading software for 24/7 operation.

The essence of providing a forex VPS is to enable traders to leverage on the advantages of physical proximity to the trading servers of their brokers at a fee that is affordable to the most retail end traders. The facilities in a VPS centre are usually partitioned and allocated to end users through a process which is similar to setting up of several user accounts, enabling several users to access the hosting services at the same time. Each user can then use the facilities as though they were using a different operating system, so that issues affecting one user do not usually affect other users. Typically, a VPS may have quite a lot of CPU cores, and a very large RAM. This can be compartmentalized or divided into several subunits using technology known as virtualization technology. Each of these subunits can then be allocated to a different user. Each forex trader using such compartmentalized server space can then function independently of other users in the system.

How Does a Forex VPS Work?

Forex trading is an activity which leaves little room for errors. Today’s trading needs demand the use of software that are fast, stable and accurate. Therefore, forex VPS facilities provide a good atmosphere for such software to run seamlessly on forex accounts. Typically, institutional traders pay a lot of money to site their trading engines close to the trading engines where they derive their news trades. As an example, the New York Stock Exchange houses a nearly 2,000 square feet underground complex where thousands of institutional traders collocate their trading engines.

Hosting trading software on such collocated facilities costs a lot of money which more than 90% of retail traders cannot afford. This is where forex VPS services have come to the rescue by providing access to such advanced facilities for round-the-clock trading at a fraction of the cost of using a full-scale co-located facility. What’s more, the cost of scalability is minimal, which means that you can step up to use even more advanced facilities without a huge dent on your pocket.

Types of Forex VPS Software/Hardware

There are several types of VPS systems in use. Not all of these are suitable for use in forex VPS trading. A mention is made of them so you can use this to make an informed choice when you want to pay for a forex VPS plan.

  1. Virtuozzo is a VPS system which runs at the level of the operating system. It works on both Linux and Windows OS. Virtuozzo runs on the principle of virtualization and compartmentalizes a single large VPS into several user packages. This is akin to shared hosting where several users run on a single server.
  2. OpenVZ runs on Linux OS. OpenVZ operates a bit like the Virtuozzo systems but allows each compartment to have independent characteristics such as root access, IP addresses, RAM, applications, users and configuration files. This allows the performance and workload of a user compartment to have little effect on other users. If you own a computer than runs on Linux, this is the option for you.
  3. The Windows equivalent of OpenVZ is the Microsoft Hyper-V. The advantage of this hardware-based VPS system is that it allows for a great degree of isolation between virtual devices running on the same physical server. Once more, this is an advantage as it allows a user to operate a forex VPS without fear of being adversely affected by an overload from another user on the same server.

How to Choose a Forex VPS

Choosing a forex VPS out of the several hundreds of services out there can be daunting. However, it is more about choosing the right forex VPS for you as opposed to choosing the “best” forex VPS. Truth is there is no such thing as the best forex VPS. It is all about choosing the most suitable forex VPS. Here are some tips to enable you make a choice of the most suitable forex VPS to use.

  • Performance

What is the performance of the VPS you want to choose? Performance here has to do with the kind of technology that the VPS uses. Most forex VPS out there use virtualization technology, which allows the forex VPS company to compartmentalize their resources and split them among several users. In other words, a single large server is split up into several isolated containers known as virtual environments, and each one acts as though it is a standalone virtual private server. While this system may work for many people, it has a major drawback. If the virtualization is done at the level of the operating system rather than at the hardware level, a high workload generated by a single user could overwhelm the entire server and cause reduced performance in other user compartments. This will manifest as reduced uptime and drop in speeds, which can cumulatively lead to increased latency over time.

You therefore need to use a forex VPS which is built on hardware-based virtualization as well as OpenVZ and Microsoft Hyper-V technology. Avoid using Xen-based VPs systems as they are not suited for forex trading. So do not just look at the features of the forex VPS you want to buy; look at the technology behind it and do some research to find out how others before you have fared with the software.

  • Flexibility in Hosting Plans

VPS hosting providers should be able to provide the users with a choice of several plans so that the trader can make a choice based on individual trading requirements and availability of funds. To put this in perspective, a trader with one trading account may not require so much bandwidth and storage space. If the same trader has up to 5 accounts being traded by a single EA, this will consume more resources and require a plan with more robust features. So there should be a range of plans to enable the trader make a choice of the one which will be most suitable.

  • Location of VPS/Broker’s Server

You should as a trader, find out the location of your broker’s servers. This will enable you select a VPS which is co-located with your broker’s servers. The table below illustrates the examples already provided in another article on this site, on the effect of co-location of a VPS with a broker’s server on the latency of the VPS.

latency

We can see that the latency period is lower each time the VPS was co-located with the broker’s server. That is why the latency of the London-based VPS is lower with Europen-based brokers Admiral Markets and ADS Securities, and higher with Advanced Markets which is based in the US. In contrast, Advanced Markets has a lower latency period on the New York-based server.

  • Uptime

Forex trading on a VPS is supposed to be a round-the-clock affair. So a VPS should provide the trader with at least 99.99% uptime. For a VPS provider to have such uptime levels, there should be a lot of redundancy in the system. Redundancy allows the VPS provider to have adequate system resources to seamlessly transfer users to another compartment if there is downtime on a particular user compartment. Anything short of this is unacceptable.

  • Accept a Variety of Applications

A forex VPS hosting service must be able to provide the trader with the ability to install any kind of forex software and forex applications to aid the workings of the installed EAs. Sometimes, traders may need to place some add-ons to enhance the workings of an EA. By using a forex VPS which allows them to add these other software in addition to the EA, it gives such traders the added advantage of being able to trade as they want.