Latency, the delay between triggering a command and the computer’s response time, can be the difference between a successful or failed trade. The higher the latency – delay – the more money can be lost on a trade. When you click the “buy” or “sell” button, the order must register with the trading server.
Even a delay of a few seconds can result in a price shift, which can cumulatively costs thousands of dollars throughout the year. Forex traders require reliable, secure, and speedy platforms to conduct their trade, and fortunately, solutions such as Windows VPS can help.
How Latency Impacts Forex Trading
If you’re wondering why latency is such a problem in Forex trading, it’s important to realize that latency isn’t simply an inconvenience or a technical issue. Rather, it costs massive money. When high latency becomes a factor, the trader must deal with slippage and the infamous re- and off-quotes.
For instance, a high latency could result in a price shift after the “buy” or “sell” button is clicked. While price shifts can go in either direction, they tend to go opposite your desired position. A minute slippage of 0.5 pips might seem insignificant, but this can result in a loss of thousands of dollars in a single year. Furthermore, latency strikes again when you must deal with re- and off-quotes.
Re-quote means your broker is forced to place your order at a price different from the one you expected. On the other hand, an off-quote means your broker is unable to place the order, since the trade may no longer be accepted based on the price requested. Traders serious about avoiding these issues must search for a solution to lower latency.
Average traders who work with the MT4 server from home will have an execution time as high as 800 ms. As a result, approximately half of every trade made by average traders will lose money because of slippage. On the other hand, high frequency traders boast a substantially quicker execution time at 5 ms, experiencing little slippage.
Whether you’re a professional, advanced, or average trader, it’s critical to understand the inevitable financial impact latency can cause.
About Forex VPS Hosting
The virtualized hosting paradigm can be difficult to understand. However, the key concept is that VPS hosting (virtual private server hosting) divides a single resource into numerous smaller “virtual servers.” Since each virtual server is running completely separate and isolated from the others, the operating systems are more secure and have multiple performance benefits.
Since each VPS is isolated, the entire system benefits with higher uptime and easier troubleshooting by technicians. Aside from benefits on the back-end, users enjoy greater reliability and ease of platform upgrades. Since data can be transported from the physical host to the virtual servers instantly, expansions are seamless and rarely disrupt existing virtual workflow processes.
The key issues that VPS hosting fixes for traders are:
- Internet and power outages
- Hardware failures
- System errors
To trade without latency and other complications, traders need a computer that operates 24/7 and is reliably connected online. A VPS is the only solution that ensures your computer is always connected to high-speed internet. Since everything is virtualized, you don’t have to worry about the traditional hardware issues that would otherwise hinder trading.
The VPS supports 99.9 percent uptime for traders. New technology allows traders to control the VPS via PC or smartphone from any location around the globe. Thanks to VPS, traders can seamlessly execute automated trading strategies without having to worry about high latency.
Furthermore, Forex brokers have more reliable access to their clients and the MT4 server, software that executes the trader’s orders and provides pertinent quotes and liquidity information.
Why VPS Hosting Works
Since the Forex VPS runs separately from the trader’s computer, he or she can rely on a dedicated server. When an EA like MT4 is running on a personal or office PC, there’s always a possibility of a power outage, internet connectivity issue, or hardware malfunction. With VPS, everything is running remotely and is therefore independent of any unforeseeable problem.
The actual process includes three entities: the trader or broker’s PC, VPS, and the MT4 server. Since EAs are installed on the VPS itself, orders are instantly sent to the MT4 server autonomously. This gives traders the ability to trade from anywhere. No longer are you confined to the physical location of your home or work office. All that’s needed is a network connection and ability to log into your VPS. Whether you’re on a business trip or family vacation, VPS hosting allows you to complete a trade from anywhere.
For most traders, security is the biggest factor in making an investment decision. VPS systems offer robust security that not only provides data being transported in the cloud, but also provides antivirus software and other resources to keep your own system secure as well.
Perhaps the greatest benefit, however, is reliability. Since the VPS is constantly working, automation keeps your presence online, even if you go offline. For instance, even if your power goes out, automated systems continue working on the VPS and aren’t reliant upon your ability to get online.
Reduce Slippage with VPS
While VPS hosting provides traders with numerous benefits, the primary function VPS plays in Forex trading is to reduce latency and slippage. Without VPS, executed orders may be delayed enough for the pips to slip just a fraction of a few points. That slippage, regardless of whether it is small or large, costs traders money. When coupled with the unpredictability of the market, slippage becomes a serious consideration that must be addressed.
The key solution is to prevent latency, which ensures orders are transmitted as soon as they are sent. By investing in VPS for Forex trading, you not only keep your deals secure, but also increase the likelihood of achieving the quotes you want.
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