Getting a co location dedicated server, but need some help!
Soon i am going live on ES futures. So i found out that a low latency is important and how close you are with the CME in Chicago. Especialy in my case where i live overseas, in the Netherlands to be precise where i have couple hundres of ms.
So i was told that i can get a co-located server with Steadfast which is a great solution for my execution.
Im completely not familiar with dedicated servers and latencies and stuff but i am learning. So here some really novice questions
1. I found out that this low latency fast execution works with Automated trading like Strategy Automation on Multicharts where is puts the orders with stop and limits beforehand and not with manual trading.
Is this true? Since next to Automation i also would like to trade manually and make advantage of the co located server i pay for.
2. I heard that if i place a stop order or limit order on my trades (so not using Strategy Automation on MC), it would reduce latency. Is this true and falls this also under automated trading? since i manually pressed on a price to make an order and have set my limit and stop order beforehand which shows automaticaly on my platform when i make an order.
3. So i was told that a dedicated server for faster execution won't work with scalping, but what is the difference between scalping and short time trading with limit and stop orders? Does scalping not have limit or stop orders?
So basically i want to know if my dedicated server will help me with manual trading, i don't think i am scalping. For example when i enter at market price i always have a limit and stop order, but i do jump in at market price and sometimes i wait for the market to hit the price i made an order, but i have at all time my stop and limit orders. So will it help me with faster execution on the manual part than the 200-300 ms that i already have ? BTW my chart is from MC and platform is OEC Trader
Thank you very much
Last edited by Elite; January 11th, 2013 at 07:50 PM.
False: Automated trading does not always use stop and limit orders, but an automated trading strategy can also use market orders. If you only use stop and limit orders, the latency gain of a colocated server is close to zero, as the orders are exchange held anyway (unless you simulate them locally).
If you trade manually there is no latency gain from a colocated server. Both the signals for trade data and order execution need to travel to your PC in Rotterdam. Here are the paths that a signal has to travel
without colocated server: exchange -> data feed server -> your PC -> broker server -> exchange
with colocated server: exchange -> data feed server -> colocated server -> your PC -> colocated server -> broker server -> exchange
The time consuming part of the journey is the trip to your PC which adds at least 100 msec to the latency. If you trade manually, the signal
-> always needs to travel to your PC - whether this is the original data feed or an image transmitted from the colocated server does not matter
-> you will also need to take into account your reaction time, which is at least 250 msec
However for automated trading no signal needs to cross the Atlantic Ocean, and that would be your latency gain of about 100 msec
-> automated trading with colocated server: exchange -> data feed server -> colocated server -> broker server -> exchange
If you use stop or limit orders, these are residing at the exchange. There is typically no latency, except in the case that you enter stop and limit orders very close to where the market trades such that they are executed immediately.
The dedicated server works with scalping, but will not help you in any way, as it cannot reduce latency. If you do scalping, the signal will have to travel to Rotterdam, then you will execute, and your signal needs to travel back to the US. Signals travel at best with 60% of the speed of light at about 180,000 km / sec. The round trip from Chicago to Rotterdam and back is about 15,000 km. The theoretically obtainable speed calculated from these parameters is 83 msec, you cannot go faster unless you take yourself out of the circuit.
The dedicated server will not reduce latency.
The main reason to have a dedicated server for a manual trader is convenience. You can use your IPAD to connect to the server which is always running and do not need to spend your day in front of a PC.
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Thank you for your answer, i have a better clue now but i think i mixed co located with dedicated. Some things i am not sure if i understood right.
1. The Automated trading i do with Strategy has alway a stop order and limit order, in this case if i use a co located server my latency will reduce (below 5 ms i believe) and my entry order and limit order will fill faster right?
2. I believe i didn't understood the concept of manual trading. With manual trading in my case i mean that i place an order in most cases around 1point distance or higher from the market price WITH a stop and limit order: In this case will a co located server help me with a faster fill for my entry order and limit order?
3. And sometimes i jump in at market price (using $tick) again with a stop and limit order, in this case will a co located server help me get a faster fill for my entry order and/or limit order?
4. I tested my ping to chicago server it was 186 ms. Now if i have a co located server and in cases where i for example jump in at market price or have my orders very close to market price which if it might not give me a very low latency, will it at least lower my 186 ms for a little? or will my ping stay at 186 ms in these cases?
and how many ticks do you mean by orders very close to market price? i use ES future
BTW if my issue is only to get faster fill would i only need a co location and not a dedicated server?
Thanks a lot
Last edited by Elite; January 13th, 2013 at 11:43 AM.
Thanks @Fat Tails for an - as always - great and detailed explanation.
Since I'm intending to use my VPS for an automated strategy as well, I just want to add another advantage to the use of a VPS.
It's not just convenience to have access to your trading platform with a mobile device rather than having no need to run your trading computer at home all day long or 24/7,
since you'll have a machine running independently from any power outages and internet provider / hardware issues at home.
Last edited by Daytrader999; January 13th, 2013 at 08:48 AM.
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I have already tried to answer, but you did not read it all, did you?
1. A colocated server will usually NOT ensure better fills for limit and stop orders. The orders are exchange held anyway and there is no latency. It has no importance whether the orders were entered manually or via an automated strategy.
2. See response 1.
3. See response 1.
4. See response 1 for limit and stop orders. If you manually jump in with market orders your latency will stay about the same. You will NOT reduce latency. Please read my first post in this thread. I have explained the way that the signal has to travel, if you enter a position manually.
The following user says Thank You to Fat Tails for this post:
Sure i read it all, but it's confusing . I read co location will give you faster fill for entring and exiting and better result than at home overseas, but now its written co location wont ensure faster fills.. at steadfast they told me it would work for both automated and manual but faster with automated and somewhere else i read it's not going to help with manual, could be my wrong understanding, but thanks again
I think you first have to understand the whole logic, and what happen if you click on the "BUY Market" button, or with a limit or a stop order.
You also have to understand the difference of behavior is an order is managed by your platform (a trailing stop for example), or it's already acknowledge by the exchange and reside on it.
Last point, what really matters is not the location of the exchange, but the location of your broker's servers.
If you trade the ES with Interactive Brokers for example, the best location to be is not Chicago, but in New-Jersey.
Usually in trading, those who know don't talk, and those who talk don't know. (Al Brooks)
success requires no deodorant! (Sun Tzu)
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With chicago i meant that i need to be close to the CME since i trade the ES and thought closer to exchange is important didn't know that closer to the server of my broker is even more important, but where is their server located? So i need to find a data center that is closer to the server of my broker and not the exchange?