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Using a cloud server instead of your home computer for systematic trading is an excellent solution to avoid problems related to internet disconnections or power outages and blackouts.
However, while using a remote machine can provide greater security and stability, it can also have some disadvantages you should be aware of.
In this video, we analyze the pros and cons of cloud servers (VPSs and dedicated servers) and provide an estimate of the average monthly costs based on the size of your portfolio.
Hey guys! I am one of the coaches of Unger Academy and today we'd like to talk to you about cloud servers, that is, remote computers that allow systematic traders to trade in conditions of greater security and stability. Cloud servers can be a valid alternative to running systems on your home computer, but they also have some disadvantages that, in my opinion, should not be underestimated.
In most cases, as soon as you’ve learned the basics of programming and created your first trading systems, you want to start trading them, right? You want to become more familiar with the platform and its automatisms and learn to fix the various issues and problems in real-time trading, whether you do it with real money or even in demo mode.
Usually, at this point, you need to make an important decision. You have to choose between activating the systems on your home computer (which is the computer where you programmed your systems) and renting a remote computer that lets you operate on a cloud server.
Using a cloud server for systematic trading means renting a server from a cloud service provider and installing your platform and software on a remote machine. In short, you need to put your workspaces, your scripts, and the software you use for systematic trading onto a different device.
Then all the orders will be sent by that machine, so the cloud server will execute your instructions as your home computer would do. In fact, cloud servers work precisely as a home computer does. You log in, authenticate yourself, and you get access to the computer.
So let's take a look at the pros and cons of this kind of solution. Retail traders generally use these infrastructures to avoid the issues and problems that might occur when you use your home computer, such as blackouts and power outages, or internet connection failures. So let's see in more detail what are the advantages and disadvantages of cloud servers.
As for the advantages, remote servers are usually data centers, which means that internet connection problems are improbable. Why? Because these servers generally have redundant connections. Moreover, they also have power units that allow them to manage power outages and blackouts. This means that you should be able to avoid any problem of stability or internet disconnection. In fact, data centers comply with specific standards of security and autonomy in terms of both the Internet, because they use backup connections, and power supply, because they use power units.
As far as stability is concerned, these data centers generally guarantee a higher quality standard. This is also thanks to the operators who constantly monitor the conditions and the uptime of these infrastructures. So power outages or any other kind of inconvenience are managed by a staff of people who fix them in the shortest possible time.
In my opinion, there's also another less obvious advantage, which is this one. Since you generally use these remote computers only for trading (because you don't use them for personal purposes), the risk of external threats such as viruses and malware is lower.
So, if you do install only the trading platform and software on these computers, it'll be more difficult to be a victim of malware or other dangerous files than it would be on your home computer. Although, of course, you should still stick to some good practices and be careful about what you install on and do with these remote computers.
As for the disadvantages, I think that the main one is that renting a cloud server represents an extra cost. Regardless of the kind of server you rent, you'll have to consider an additional item of expenditure in the list of your systematic trading expenses, and it's also quite significant. Well, of course, this depends on your trading capital, but it's usually not a particularly negligible expense.
Another disadvantage, at least in my opinion, is the need to duplicate your workspace. What do I mean by that? If you already have configured your platform and workspaces on your home computer, you'll have to export to the cloud server everything you need to work on it. In short, you'll have to set up the cloud server with all the tools and software you need to trade.
This introduces another critical disadvantage: licenses. Usually, when you rent a server, the cost of the operating system license, such as Windows, can be either included in the subscription fee or be paid separately. In both cases, the expense is not that trifle, unless, of course, you have and use your license, provided that your provider allows you to do so. This is generally possible on dedicated servers but not on VPSs.
The problem of licenses involves your trading platform as well. In fact, to run the platform simultaneously both on your home computer and on your VPS, you probably need two licenses.
So this is undoubtedly another aspect that should not be underestimated. Another essential thing to keep in mind is that there are mainly two categories of dedicated servers. On the one hand, we have the servers called "VPSs", and on the other, we have the dedicated servers. So, what is a VPS? Well, VPS stands for 'Virtual Private Server', while DS stands for 'Dedicated Server'.
Many people use the acronym 'VPS' to refer to any computer in the cloud, but this is not the case. In fact, a Virtual Private Server is very different from a Dedicated Server. More specifically, we can say that the private virtual server, so the VPS, is nothing more than a single machine in a large server.
In fact, service providers (and later, I'll tell you some names) create virtual machines inside their servers, so what users do when they rent a VPS is simply renting one of those individual virtual machines. On dedicated servers, instead, you can rent the whole server if you want to do that.
So, there's actually a big difference between the two because, in the case of the VPS, you rent a virtual machine, whereas in the case of the dedicated server, you can rent an entire server.
The difference in terms of costs is also considerable. In the case of VPSs, so virtual servers, the fee you pay is usually based on the power you want to rent. However be careful, because service providers are not required to guarantee 100% of that power. And since they’re not required to do it, they don't.
On the other hand, if you rent a dedicated server, so an entire machine, you can have all the computational power of the machine you rent at your disposal.
This means that dedicated servers generally provide greater stability since the machine's performance is constant and depends on the physical computational power of the machine you rent. So the difference between VPSs and dedicated servers should not be overlooked.
So, keep in mind that, as I said before, VPS service providers are not required to guarantee 100% of the power and resources you rent in most cases. Generally, they only have to guarantee a minimum share that is not even near 100%. Considering the best contracts I've seen, you can even get just 50% of the resources that you rent.
Now let's see some of the main cloud servers providers out there. Of course, we need to mention Amazon Web Service, AWS, which is one of the most important cloud server providers in the world. However, I strongly suggest that newbies don't use it. Its user interface and commands are quite complicated, so I think this service is not really suitable for those who are not particularly experienced in the IT field. However, it's an excellent solution for those who are already familiar with computer science. Plus, Amazon AWS is still one of the main providers in the world, so it is a great choice.
The same goes for Microsoft Azure, which shares both the strengths and weaknesses of AWS. Then, there's Aruba, a leading Italian company in the web hosting industry. It's been offering web hosting, certified email, and domain registration services for years, and it also allows you to rent VPSs and certified servers.
Vultr is another interesting VPS service provider. I think it's American if I can remember properly. Anyway, it's also very good. Finally, we have OVH, a French company and a world leader in the remote server services industry. It has data centers almost all over the world, and it lets you choose where you want to place your server. In recent years, they built new data centers in Virginia and Oregon, adding to the ones they had already created in Canada. So OVH represents an interesting solution for those who, perhaps like me, work a lot with the American futures markets quoted on CME.
Back to costs, what is it that generally affects the cost of a cloud server? Certainly, the most important factor is the nominal resources of the machine you rent. However, how much of those resources are actually guaranteed, as specified in the contract, also play an important role. I've also seen that service providers offer higher prices depending on the kind of contract you subscribe to. So the contracts that guarantee a higher percentage of available power and resources, well, are obviously more expensive than the other ones. Another important factor is the location of the data center because, obviously, costs vary depending on the server's location. Finally, the Windows license is also a relevant element. In fact, there are different versions of Windows Server. The basic one is the Data Center version, but there are others as well.
It's important to remember that in many cases, the cost of the license is to be paid separately, which means that you have to pay more compared to other solutions. Just to give you a general idea of the costs, we can say that for small portfolios that contain 5 to 15 trading systems, you usually need a VPS with 2-4 CPUs and around 8 GB of RAM.
I wouldn't use a machine with less than 8 GB of RAM as they've now become a minimal standard. Usually, the cost for such a server would be around €50 per month. For medium-sized portfolios, that is, for portfolios that contain 20 or more systems, I recommend a VPS with at least 4-8 cores and 16 GB of RAM. This would cost around €60-100 per month. In any case, I recommend using a dedicated server with at least 4 cores and 16 GB of RAM, and this would cost you about €40-60 per month plus the cost of the Windows license, which, as mentioned, is to be paid separately for this kind of server.
Finally, for larger portfolios, that is, portfolios that have from 50 to 100 active systems, I would have a VPS with at least 8-10 cores and 32 GB of RAM, and the cost would be around €250 per month. Or, if you prefer a dedicated server, you would need at least 4 cores (it'd be better opt for a “gaming” machine because they generally have a higher frequency) with at least 32 - 64 GB of RAM. In this case, the cost would start from around €80 per month plus the Windows license fee, unless you have and can use your own.
All right, guys, this was our quick review of cloud servers. We've seen what remote servers are, the main differences between VPSs and dedicated servers, the pros and cons of the different solutions, and I've also given you an estimate of how much you would spend, on average, for these solutions.
Now it's up to you to delve deeper into the topic, which is undoubtedly very important for those who do systematic trading like us. And if you enjoyed this video, please give it a 'Like' and share it.
I also remind you that if you click on the link you find in the description of this video, you can watch a completely free webinar that will give you an introduction on how to build trading systems and create a well-diversified portfolio of automated strategies by following the method developed by 4-time world trading champion Andrea Unger.
We'll see you on our next video dedicated to the world of trading systems. Bye-bye for now!
Need More Help? Book Your FREE Strategy Session With Our Team Today!
We’ll help you map out a plan to fix the problems in your trading and get you to the next level. Answer a few questions on our application and then choose a time that works for you.BOOK YOUR FREE STRATEGY SESSION NOW >>
Andrea Unger here and I help retail traders to improve their trading, scientifically. I went from being a cog in the machine in a multinational company to the only 4-Time World Trading Champion in a little more than 10 years.
I've been a professional trader since 2001 and in 2008 I became World Champion using just 4 automated trading systems.
In 2015 I founded Unger Academy, where I teach my method of developing effecting trading strategies: a scientific, replicable and universal method, based on numbers and statistics, not hunches, which led me and my students to become Champions again and again.
Now I'm here to help you learn how to develop your own strategies, autonomously. This channel will help you improve your trading, know the markets better, and apply the scientific method to financial markets.
Becoming a trader is harder than you think, but if you have passion, will, and sufficient capital, you'll learn how to code and develop effective strategies, manage risk, and diversify a portfolio of trading systems to greatly improve your chances of becoming successful.