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How Much Has Artificial Intelligence Changed Forex Trading

by Josh Biggs in Marketing on 4th July 2019

Those 5 trillion dollars that flow every day through Forex trades are already influenced by Artificial intelligence in the last few years, we witnessed significant developments in AI-powered tools which enable traders to better predict the movements of complex, global financial markets. This comes as nothing new to AI researchers. Since the beginning of the 1990s, they have been predicting that AI will change the forex market. In 1991, MIT Sloan Management Review published a revolutionary article called Managing Foreign Exchange for Competitive Advantage. It emphasized that computerized models will play a vital role in the foreign exchange market.

This was followed by a 2005 University of Cambridge article that brazenly claimed that AI will be the primary driver of these huge big-data driven changes. Nowadays, advanced AI algorithms are able to complete complex machine learning and are broadly used.

Machine learning and predictive analytics as a new approach

Financial traders have been using AI for years. Although, nowadays, it is more important than ever. Traders are becoming increasingly dependent on predictive analytics and big-data. More sophisticated AI algorithms are able to collect data in real time and make very precise, albeit short-term, predictions. They have already proven their worth for scalping trading. Their only problem is that they aren’t as accurate over longer periods of time. It is more difficult to calculate a much bigger number of variables since more events can trigger pricing change. Lest we forget the probability that any of those events will actually occur. Modern predictive analytics can guess price patterns over a period of weeks, or even months, as those variables that influence trends, can be accounted for. Even the simulation of these trades with demo accounts is available. Moreover, AI has helped forex traders minimize their risk during turbulent markets. For instance, with the stop-loss orders, which are AI algorithms that automatically sell assets after their prices fall below a certain threshold.

Traders and AI

One Forex analytics enterprise is so confident in its AI that it even provides a loss coverage guarantee for its customers. ROFX Forex Trading Program developed an analytics robot called Forex AI. This AI runs on neural networks which enable it to update not just data, but even its internal algorithms. It allows newcomers to the global currency market to make informed trades. Its effectiveness is so great that ROFX ensures traders that the capital they put into trades as advised by Forex AI is completely safe from negative trade results – a loss coverage guarantee. Traders like Ever Forex also experienced AI influence firsthand, which only contributed to more growth in the multi-trillion-dollar exchange. For better or for worse, the most advanced, self-correcting, neural network AI tools in the worlds are giving Forex analytics systems with highly precise rates for predicting short-term market movements. In the current environment of disruptive business and tech models giving global institutions a run for their money, AI-powered Forex analytics is showing how disruptive techs can offer market stability.

Innovative predictive analytics

Japanese organization Nikkei recently utilized AI to predict Dollar-Yen exchange rates. The software was able to predict the value of USD-JPY in a month’s time, and the prediction was compared against the business’s top analysts. The AI was better – with the estimation that was 0.05 away from the correct value. While the analyst’s prediction was off by 0.6 from the correct value. The AI utilized vast amounts of data from the company’s articles, natural language processing, trends, market indicators, and commodity prices. A similar study by I Know First found that an AI guessed the correct values 77.75% of the time over a 7 day period. AI algorithms can give information about short-term strategies with real-time data, but the forex industry is just at the start of its journey with artificial intelligence. In other words, it is still underdeveloped.

The right kind of information

With all this focus on real-time analytics, analyzing data correctly has become somewhat neglected. And it is just as important as analyzing it swiftly. Anyone in general after a battle. People often wish they had data beforehand, without knowing how to apply that data properly. This mindset leads to analytics brimming with un-relevant data that can, in the worst case, cause more damage than produce results. From the perspective of a forex trader, knowing which clients impacted its profit and loss is fundamental. It’s all about being able to drill into live pricing and analyze what is happening. External LPs’ prices can go sour at any time, so understanding which instrument of which LP is causing the issue is an excellent example of how real-time analytics can spot an issue and provide a solution.

The forex market has transformed over the years and AI was one of the biggest causes for this. It gave birth to predictive analytics models and machine learning that helped forex traders gain a big advantage not previously available to them.

 

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