I've been looking for a cheap but reliable virtual private server (VPS) to run my trading program for the last few months. I ran my QTD program on 3 remote servers in UK and Germany in April for an entire month as performance testing. One in UK on a Xen cloud. One in Germany on OpenVZ. And a last one also in UK on KVM technology. This post is a summary of my initial findings on what to watch for when choosing a server provider for running a remote trading server. Keep in mind that this is for low-end, low-frequency, retail trading. Where latencies in the range of tens of milliseconds are considered good. General target price range is US\$10 - \$20 per month for an unmanaged server with 512MB of ram and 600MHz-equivalent of circa 2006 Intel CPU. Low price is the primary consideration here. If you don't care for the technical details, the top VPS names are Linode, Hetzner, and 6sync for Linux-based VPSs. Linode offers Xen VPSs in US and UK. 6sync offers KVM VPSs in US only. Both companies offer Linux-based 512MB instances for \$20 as a starter server. Hetzner offers KVM VPSs in Germany for €7.90. Cloud servers like Amazon EC2 and Rackspace Cloud are too expensive for running 24/7.
Location, Location, Location
Use a datacenter that's at least in the same sub-continent as your broker's datacenter. You wouldn't want your data to travel half-way around the world just to save a few bucks. It adds unnecessary latency and prices are comparable in either the states or Europe nowadays. Although Asia is another story. If you use more than one broker, you can use multiple servers or pick a server location that sits between them on the internet backbone. TeleGeography provides global internet maps to identify best locations. I trade with Dukascopy and Oanda. One in Switzerland and another in the states. As such, Internet hubs in cities like New York, London, and Frankfurt are prime targets for low latency between both brokers. As I trade more at Dukascopy, I'm biased to European servers. Furthermore, London and Frankfurt are the #1 and #2 internet hub in the world. London has 7,723 Gbps and Frankfurt has 7,218 Gbps capacity in 2010. Whereas New York, 5th in the world, has 3,850 Gbps.
Virtual private servers are merely reserved resource chunks of a computer in a datacenter. This is achieved through the use of virtualization technologies. And there are quite many of those as I have discovered. Here are three that you'll likely hear about in your search.
- OpenVZ. This is the most popular and least preferred platform for trading servers. It's often used by budget hosts because resources between virtualized instances are not well isolated. As such, a host can oversell a server's resource as most webapps have sporadic resource utilization trend. In other worlds, it is unlikely all the virtual private servers would demand their maximum allocated resources at the same time. However, trading servers require a consistent and guaranteed level of computing resource. So stay away from VPS that runs on OpenVZ unless you want to see server hiccups.
- Xen. This is what Amazon EC2 and Rackspace Cloud runs on. Xen offers true resource isolation so that you're less likely affected by your virtual server's neighbours. What you see is also what you get. So if you're promised 512MB of memory, you'll get 512MB of memory. However, processing power varies tremendously across different VPS providers. A micro instance on Amazon EC2 offers 613MB of memory, for example. But it is no match for even a 256MB instance on Rackspace Cloud. I was able to run a LXDE desktop GUI plus a java program on Rackspace but couldn't do it on Amazon.
- KVM. KVM uses the Linux kernel to virtualize. It's said to offer lower overhead to the host server so that it can provide better value than Xen. Like Xen, it offers true resource isolation.
In summary, either Xen or KVM are good but stay away from OpenVZ.
Key question here is: Linux or Windows? If you're unfamiliar with Linux and is not interesting in learning about it, use a Windows Server 2003 or 2008 provider. Windows Server 2003 is preferred as it uses fewer resources just to run so it's cheaper. Do note that Windows VPSs are \$10-\$20 more expensive anyway because you have to pay for a monthly license lease. With the use of a Windows-based VPS, you can connect to your server through the remote desktop protocol (RDP). It's just a matter of running the Remote Desktop application on your local machine to your remote server. Then you'll see the remote machine's desktop on your own machine. And then you can control the remote server just like any other Windows computer. Very simple. However, I prefer to run Linux because of its renowned stability and lower cost. The downside is that you need to know what you're doing to tweak the server for trading. Linux uses very little computing resource to run. I can squeeze JForex and Metatrader together on a Linux VPS with only 256MB memory. By comparison, you need at least 512MB on a Windows box just to get the OS running. And there's no licensing fee for Linux too. A double savings.
When choosing a VPS provider, consider factors such as location, virtualization technology, and operating system(s) offered. Once you've narrowed your search to a shortlist of providers, the next step is to compare their specific VPS offerings by looking at price, services, and technical specifications.