Trading on the forex market or foreign exchange is an increasingly popular pastime, and one that generates more than $6.6 trillion in daily trading volumes.
This figure was as low as $5.1 trillion as recently as 2016, with concepts such as automated trading and the deployment of advanced forex robots making the market far more accessible to part-time traders.
Increasingly, we’re also seeing artificial intelligence (AI) impact the forex market and how international currency pairs are traded. In this post, we’ll look at how AI has changed the FX market and will continue to do so in the future.
Explaining the Role of AI in Forex
AI is a broad technological term that covers a range of smaller innovations, while it underpins a global marketplace that will grow at a CAGR of 20.1% between now and 2029 before peaking at a staggering $1,394 billion.
Two of the main elements of AI are machine learning and predictive analytics, the former of which utilises algorithms and computer programs to identify patterns in potentially huge swathes of data.
The organsiation and analysis of such data (and its associated patterns) also leads into the notion of predictive analytics, creating more accurate and insightful forecasts for the future.
Over time, it’s the gradual evolution of automated and AI-powered traded programs that caused a marked increase in market participation, while some 90% of all traders now leverage this technology in order to optimise their profitability.
How Has AI Changed Forex?
As we can see, the application of AI and subsets such as machine learning has already improved the collation, analysis and utilisation of data, which has in turn contributed to more accurate forecasting tools and the identification of more relevant market trends.
But how else has AI changed the forex market? Here are some of the key trends and adjustments to keep in mind:
- #1. Improved Risk Management: If we assume that AI helps to unlock larger datasets from both structured and unstructured resources (such as social media), it’s fair to surmise that this technology has lead to improved risk management over time. Certainly, high level AI tools can better calculate and identify market risks, while also optimising your chances of achieving a return. This immediately reduces the risk of loss while simultaneously boosting your individual profitability.
- #2. Use Automation: Investment vehicles like spread betting help you to speculate on the market’s movements enable you to profit freely without assuming ownership of the underlying assets, while this practice can also be optimised by AI-powered automation tools (which is ideal for scalpers and day traders). Certainly, AI has helped with the analysis of relevant data and delivery of real-time performance tracking for trades, allowing you to focus on the deployment of your wider strategy.
- #3. Using AI in Your Trading: Despite the relative complexity of how AI and machine learning works, you don’t need to create your own algorithms to leverage the technology. Instead, you can access such tech through your online forex brokerage site, which in turn unlocks enhanced data forecasts that aid a particularly high volume of trades. So, by using existing AI tools, you can revolutionise your trades and increase trading volumes without compromising on performance.
