How is AI revolutionizing FX market in a way we didn’t even realize

The foreign exchange or forex market is the biggest financial market in the world. It is even bigger than the stock market. Moreover, the forex market continues to grow, and one major reason for this is the use of the latest technologies, including artificial intelligence. In fact, it wouldn’t be wrong to say that AI is revolutionizing forex trading.

Prediction with accuracy 

According to the 2019 Triennial Central Bank Survey of FX and OTC Derivatives Markets, the forex market has a daily volume of $6.6 trillion. When so much money is at stake, it is natural for market participants to demand and develop tools that help to reduce their risk and increase their accuracy.  

This has led to the development AI-led solutions that not only make it easy for traders to execute transactions but also lower the risk of failure. In a nutshell, these innovative technologies enable traders to analyze volumes of data easily, simplify the trading processes, and constantly track their performance in real time. All this eventually results in traders making informed decisions. 

Let’s take an in-depth look at how AI has transformed (and is transforming) the forex industry.

The very first use case is algorithms that analyze the market and provide tips on how to enter the best trades. These AI-based tools use predictive analytics and machine learning to predict market movements as well. 

These machine learning tools use historical data and complex algorithms for real-time data analytics. Traders can use AI predictions to design their long-term strategies. They can also customize these algorithms based on their risk level and preference.

Moreover, the tips and predictions from these tools are quite accurate, and their accuracy continues to improve with time. For instance, a few years ago, Nikkei added AI as a competitor in a contest called the "Dollar-Yen Derby” to predict the exchange rate about a month later. To the surprise of many, the AI had the most accurate forecast in its debut, beating about 400 readers and 10 analysts. 

Equipping traders with the right tools

In addition to predicting trends, the AI-based predictive analysis also assists traders with easily skimming real-time pricing data and quickly identifying red flags. All this means traders get time and information to adjust their positions accordingly and avoid or minimize losses.  

Predictive analysis also addresses one major challenge most traders face. Prior to the advent of AI in the forex market, many traders didn’t know what data to collect, how to collect data, how to decide which data is relevant, and, more importantly, how to use the data they collected to make informed decisions. 

This resulted in traders using irrelevant data to make a trade, losing money in the process. However, with AI and real-time data analytics, traders get the data that is relevant to them and the analyses of the data. Additionally, with streamlined data and real-time data analytics, traders are able to spot problems quickly and adjust their position accordingly.  

Another major advantage of these AI-based algorithms is that they help eliminate emotional or panic-stricken trading. It is often seen that traders resort to panic selling or make decisions inspired by others rather than making a data-driven decision. This usually happens when traders don’t have meaningful information at their disposal, something that the use of AI overcomes.   

Additionally, these algorithms come in very handy at times of high volatility when there is a strong chance of a trade going wrong. All top forex brokers offer automation tools, such as stop-loss, that help traders minimize their losses during unfavorable times. 

Impacting personal life as well

It also wouldn’t be wrong to say that AI-based technologies help traders improve their personal life. Since the forex market is open 24/7, traders need to stick to their computer screens for most of the day to monitor prices and make successful trades. 

This means a professional forex trader has to sacrifice a lot of their personal life, not to mention their health. However, with AI automations, a trader is able to save a lot of time without compromising on trading quality. 

In all, we can say that AI is the future of forex trading. It is beneficial to both traders and brokers. It enables traders to make better trading decisions and gives them the right tools to make informed decisions, such as more data analytics, better understanding of external influences, strategies, speed, and computational power. Thus, in a way, these AI-based algorithms give traders peace of mind. 

It helps brokers automate key parts of the trading process and thus, results in cost savings. Additionally, the use of new technologies, such as AI-driven trading, helps brokers attract new users, especially Millennials, who were raised in a tech-driven world and, thus, stand out in technology use.