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How Artificial Intelligence is Revolutionizing Trading

The importance of artificial intelligence in the world is high. AI already influences several aspects of our lives. When you ask Siri a question, you’re using artificial intelligence. When Amazon recommends a product that you eventually buy, you’ve been influenced by AI. When you use Google Lens to make an image search, you’ve put AI to use.

Forex trading is one of the sectors highly impacted by artificial intelligence and the machine learning processes. The forex market is estimated to be worth at least 2,000 trillion dollars. $6 trillion of this amount is traded in the market every day.

Forex traders love the currency pair market because of its relatively low cost and high level of liquidity. That’s why new traders go on websites like to check for a review of brokers. The foreign exchange market also facilitates easy entry into the sector.

Nevertheless, despite these positive characteristics, the forex market has associated cons. For one, the currency pair market is very volatile. The market also comes with high risk since a trade can go the wrong way and potentially wipe out a trader’s account balance.

To boost their trading efficiencies, traders have begun to utilize artificial intelligence. Statistics have estimated that at least 9 in 10 successful traders use a form of trading robots to consistently make profits from the forex market. With AI, forex traders can analyze big data swiftly, expedite trading processes, and thus increase their win percentages on trade positions.

The Benefits of Predictive Analytics to Trading

One of the most vital advantages of AI in the foreign exchange market is the accuracy of machine learning in predictive analytics processes. Predictive analytics is a field that leverages statistical processes to crunch data and churn out algorithms to predict market movements.

Predictive analytical software beats the trading abilities of human analysts since they can crunch data quicker with lessened errors. When hedge funds and banks leave forecasts to AI software, traders can pay attention to creating data-backed trading techniques.

The performance of AI in the currency pair market has been tested by Nikkei, a hedge fund based in Japan. The firm pitched AI software against their top analysts in the Dollar-Yen currency pair predictions. The machine learning model was fed with a lot of structured and unstructured data from news articles and market data.

After a month, the AI’s performance was measured against that of their best traders. The models could predict the market more accurately than the traders, with the prediction errors being 0.05 on average from the actual market result.

More Data Increases Trading Accuracy

If you’re a forex trader, you’d most likely have come across the phrase, ‘I wish I had a larger amount of data to improve my decisions and boost profit.’ Although traders make it sound easy, collecting historical data for analysis is not so simple.

One of the most critical issues traders encounter with data mining is not understanding how data can be collected. Most traders are also unsure of the data needed to determine what influences the market. Finally, even if these traders were handed these vast amounts of data, they’d have no idea how to manipulate it and create a viable trading model.

In the end, these traders focus on the wrong pieces of data that do not correlate with market movement. This results in decreased trading performance and an overall drop in profit. That’s where AI comes in. AI can perform big data analysis and make automated actions, allowing you to identify anomalies in trading data.

Machine learning, a subset of artificial intelligence, can be leveraged to utilize big amounts of past data and perform exploratory data analytics. The insights from this analysis can then be used to create a model which makes real-time analysis of new data. This way, companies can tailor their trading strategies to the volatility in the forex market.

To place the importance of automated trading in a more familiar context, you can relate it to the stop-loss and take-profit orders widely utilized in the forex market. Stop-loss triggers are set on trading platforms to make sure that a loss never exceeds a particular price level. They’re considered crucial in a risk management strategy since traders can never stare at their devices all day long.

Take-profit orders are also set when traders want to ensure their profit on a trading position becomes secure. This way, the market doesn’t reverse unexpectedly and wipe out the money gained. Take-profit and stop-loss triggers are used in the market by almost every modern trader, which resounds the importance of automated trading.

Final Thoughts

AI is already a big part of our lives, allowing us to conduct several processes more conveniently. That’s why machine learning models are increasingly utilized to make predictions in the forex market. The performance of AI has been proven to beat that of the top human traders since big data analytics can be accomplished.