Technology that was once reserved for the exchanges and institutional traders is now readily available to retail traders: High-speed Internet, market research tools, sophisticated testing platforms, trade automation and direct access trading.
At the heart of this technology is your computer: Where you research and test your strategies, as well as where you initiate your trades themselves. Computers affect how you interface with the markets, and they must be fast, powerful, reliable and stable. Here, we take a look at various PC components and explain what to look for when you are buying, or building, your trading dream machine.
A processor, or CPU, is the “brains” of the computer. It is a small chip that performs the basic math, logic and input/output operations in a computer, interpreting and executing most of the commands from the computer’s hardware and software.
The speed at which your computer runs programs, downloads files and loads images is largely dependent on the processor, although other factors, including the amount of available memory, the type/amount of software that is running and even the cooling scheme, also contribute to the computer’s overall speed. Frequency represents the speed at which the processor runs. It is measured in GHz—for example, you might have a 3.6 GHz processor. One GHz is equal to one billion hertz. While it used to be easy to compare processors based solely on clock speed, you should also consider the number of cores the processor has, the bus speed and cache size.
Cores: Most processors today include multiple processing cores, which work together to process commands. While the cores are contained in a single unit, they are actually individual processors. Having multiple cores means that the processor can work on various tasks simultaneously. Dual-core and quad-core processors are now common, and higher-end systems typically have six cores or more.
Bus speed (FSB): Bus speed (or FSB, for front-side bus) refers to the speed at which the processor communicates with other components on the motherboard, such as memory. Higher numbers indicate higher bandwidth, meaning your system can move data in less amount of time, which can increase performance. Speed is measured in GHz, and often appears as a ratio relative to the processor speed. For example, a processor that runs at 3.6 GHz may have an FSB of 1.2 GHz; its processor to FSB ratio would be 3:1. The smaller the ratio, the more efficiently the processor can work.
Cache: Processor cache is ultra-fast memory that the processor quickly can access. It is used by the processor to store data that is about to be processed or is used frequently. Most processors have multiple levels of cache (L1 cache, L2 cache, L3 cache, etc.). The more cache the computer has (measured in MB, or megabytes), the more data the processor can store for super-fast access, which increases its performance.
What to look for: The fastest (clock speed and FSB) multi-core processor with the largest cache that fits both your needs and budget. Keep in mind that even though it’s easy to add memory to a computer as your needs change, upgrading to a faster processor is not practical for most people.
If the processor is the brains of the computer, the motherboard is the central nervous system. The motherboard (or mainboard) is the main circuit board of a computer. It has a collection of chips and controllers called the chipset, which is how your processor, RAM, video card and peripherals communicate. Most internal computer components are designed for a specific chipset; therefore, the type of chipset that a motherboard uses determines which components will be compatible with the computer (which ultimately influences performance).
What to look for? If you are buying a pre-built system, it will have a motherboard in place that is compatible with the other components in the computer. If you are building a computer from scratch or having a system custom built for you, the motherboard you choose will depend on which other components you plan on using.
Memory (RAM): Memory refers to RAM, or random access memory. RAM is composed of small memory chips that form a memory module; these are installed in the RAM slots of the computer’s motherboard. Each time you launch a program, it is loaded from the hard drive into the RAM, allowing the program to function without any lag time. The more RAM a computer has, the more data it can load from the hard drive, effectively speeding up the computer.
A system with more memory can load web pages faster, deal with more open files at a time, open large files faster, run more programs simultaneously and operate more efficiently overall. The size of the memory is measured in bytes: MB (megabytes), GB (gigabytes) and TB (terabytes); for example, 8GB or 2TB. The speed is measured in MHz; however, traders generally can pay more attention to the size of the memory than the speed.
RAM has a direct effect on your processor: The processor only can run applications as fast as the memory allows. If memory is unable to keep up with the processor, it ends up with nothing to process. It would be a mistake, then, to pay a lot of money for a super-powerful processor and get a tiny amount of memory. The general rule of thumb is that you can’t have too much RAM.
What to look for? You don’t want to skimp on RAM because it can be a relatively inexpensive way to boost your computer’s performance. Traders should look for a minimum of 4GB (8-16GB would be better) to keep data feeds and order entry interfaces running smoothly.
Hard drive: The hard drive is where the files, data, operating system and software applications are permanently stored and accessed on your machine. There are several different types of hard drives. Solid-state drives (SSDs): SSDs are similar to the flash-based memory that is used in USB memory devices (that is, “flash drives” or “thumb drives”). With no moving parts, SSDs are more stable and less likely to fail than standard hard drives. SSDs are able to pull data from the drive quickly, so your computer will boot up faster, and anything that’s on your hard drive will load faster. Other perks: SSDs use less power, which results in a quieter, cooler machine with a longer battery life. Because SSDs don’t have any moving parts, they don’t have speed ratings.
Standard hard drive: A standard hard drive has moving mechanical parts, making them sensitive to vibration and shock. Because of this, they are more likely to fail or become damaged than SSDs. Standard hard drives are measured in terms of size (how much memory the drive holds, measured in GB and TB) and speed, based on how fast the disk spins in revolutions per minute (RPM).
RAID: A RAID drive (Redundant Array of Independent Disks) allows data to be divided and replicated across multiple physical drives. This can increase data reliability and transfer speeds. A RAID configuration might have two hard drives set up so that one drive mirrors the other, ideal for backup purposes.
What to look for? Beause stability and speed are key to traders, it’s hard to beat a solid-state drive. The hard drive is the only long-term storage that your computer has, so it makes sense to shop with your future needs in mind.
A video card (or graphics card) helps your processor run more efficiently by handling the graphics portion of the processing load. Because a lot of programs are graphics-intensive, a good video card can improve the quality of your graphics because if affects the number of colors that will be available: Contrast, resolution and overall performance. While we often think of gaming when considering video cards, they can make a difference for traders who view rapidly moving price charts and data feeds.
There are two primary types of video cards: Discrete and integrated. Discrete video cards are separate from the motherboard and have memory of their own (measured in GB). They also include a specialized graphics processing unit (GPU), so discrete video cards don’t have to share the processor with other programs. Integrated video cards are built into the motherboard and use the system’s processor and memory for graphics. If these are busy processing other information, it can slow down the graphics. Integrated video cards are suitable for basic applications, such as word processing, email, surfing the Internet, but they are not the best choice for graphics-intensive applications.
Monitors: Having more than one monitor is enormously helpful in creating an easy to interpret workspace simply because there is more real estate. Some traders like to use one monitor for order entry, and any remaining monitors for price charts and other analysis tools. If you are going to use more than one monitor, it’s important to confirm that your video card(s) support multiple monitors.
What to look for? Active traders who are viewing lots of charts will be better served with a discrete versus an integrated video card. When comparing GPUs, a good rule of thumb is that the higher the number in the GPU name, the more powerful (and recent) it is. Make sure the card has enough outputs to support multiple monitor configurations.
Get what you need
Before buying or upgrading a computer for trading, it’s a good idea to review your trading platform’s system requirements to make sure your system will be adequate. “What type of user am I?” (below) shows an example of system requirements for a popular trading platform, refined by the type of user: Minimum requirements, standard user recommendations and power user recommendations.
Traders can purchase pre-built computers online or at a brick-and-mortar electronics shop. In many cases, you have the option to upgrade certain components, such as adding a faster processor or swapping out the video card. Alternatively, you can work with companies that specialize in custom-built computer systems designed specifically for traders. (Google “trading computer” to browse companies.) In many cases, custom builds use better components that, while more expensive, can improve the performance and reliability of your machine.
Because a computer is how you interface with the markets, it needs to be fast, powerful, reliable and stable. In general, the faster you trade, the more important these factors may become. In addition to the actual computer specifications, traders also should consider battery backups, surge protectors, redundant Internet connections, operating systems (Windows XP, for example, is no longer supported on most advanced trading platforms) and anti-virus software as important components in choosing a high-performance trading computer.
Jean Folger is the co-founder of, and system researcher with, PowerZone Trading, LLC. Jean can be reached at firstname.lastname@example.org.