When it comes to picking a Virtual Private Server (VPS) to install your trading platform on, there are three main considerations to make:
1. Consider what type of execution model your broker is using. The purpose of using a VPS in the first place is so that the machine that your trading terminal is installed on is closer to the broker’s trading server. The closer the proximity, the faster trade orders should be filled, and the more money you should be saving due to reduced trade order execution delay. So theoretically while the closer your VPS is to your broker’s trading server, the faster your trade orders will be filled, this isn’t always the case in reality. If your broker is b-booking your trade orders then they are almost always using some type of dealing software to delay order execution. If you start using a VPS and thus your trade orders are being filled faster and you happen to be making money because of it (scalping or latency arbitrage) then the broker is most likely going to slow your trade orders down, possibly even slower to the point where you may be worse off before you got the VPS! If your broker is a-booking 100% of their client’s orders (sending them to a liquidity provider) then typically the broker has incentive for you to make money and will not intentionally delay your orders. More money in your account means that the size of your trade orders will most likely increase and thus the commission that your broker pockets increases as well.
2. The second thing to take into consideration is location. Location is extremely important because it can also help you figure out what your broker is doing with your trade orders. The majority of liquidity providers have their own servers hosted in datacenters in New York (NY4) and London (LD4). Because of this, brokers that are a-booking all of their order flow will usually host their trading servers at NY4 or LD4 so that their server is in very close proximity to their liquidity provider’s server. In this scenario it’s in the broker’s best interest to reduce latency for their clients as much as possible. If your broker has live trading servers at both locations, try to find out from your broker which LP they are currently sending orders to and ask that your account be created on their closest live trading server.
3. The third consideration is the simplest – cost. Most brokers will pay out of their own pocket to host your trading terminal on a VPS if a deposit minimum or trading volume minimum is met. So take advantage of this and shop around until you find the best combination of broker and free VPS.
While there are many virtual private server (VPS) hosting providers out there, here are two of the more popular options that have been around for a long time: