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The Role of AI in Forex Trading

Currencies / Forex Trading Jan 06, 2023 - 10:53 PM GMT

By: Boris_Dzhingarov


According to estimates, the global forex market is worth $2.409 quadrillion, while some $6.6 trillion is traded each day across three separate trading session.

These figures have increased markedly since 2016, thanks to the rise of automated trading and the deployment of artificial intelligence (AI) to help minimise risk and optimise returns over time.

But what exactly is AI, and how has it helped to change the world of forex trading over the course of the last decade or so?

What is AI?

While AI is considered to be a cutting-edge technology in 2023, the earliest successful iteration of this concept was actually written way back in 1951 by Christopher Strachey.

Prior to this, famous mathematician Alan Turing had described an abstract computing machine that consisted of limitless memory and a scanner that could move back and forth through the memory banks, laying the foundation for the AI programs that we see today.

In simple terms, AI describes the simulation of human intelligence and its associated processes by machines, usually computer systems and algorithms. To achieve this, it features a number of different technological components, including machine learning, while specialist hardware and software is deployed to create the necessary algorithms.

AI systems broadly work by ingesting and collating large amounts of data (from both structured and unstructured sources) and analysing this for relevant correlation and patterns.

From here, systems can make informed and accurate predictions about future trends, with this having relevant across a broad range of applications.

How has AI Changed Forex and its Trading Mechanisms?

Ultimately, AI and machine learning have enabled traders to draw more complex datasets from a wider range of sources, improving the quality and depth of their financial analysis.

This includes drawing information from unstructured data sources such as social media platforms, allowing for real-time trading insights and even making it possible for novices to build expert forex strategies through social and copy trading.

Because of this, AI is thought to eliminate the negative impact of human emotion and risk associated with individual trades, while furthering the scope of automated trading in the marketplace. Currently, it’s thought that 90% of traders use automated or AI-inspired algorithms to make money in 2023, highlighting just how popular the technology has become.

In practical terms, AI aids forex traders through the application of machine learning and predictive analytics, which combine to collate and analyse existing data to forecast future market fluctuations.

What’s more, predictive analytics software is capable of reviewing huge swathes of data much quicker and with virtually no mistakes, potentially levelling the playing field between inexperienced and seasoned investors in the process.

In this respect, AI is a game-changing technology for the forex market, while it continues to drive increased participation rates across the board.

By Boris Dzhingarov

© 2022 Copyright Boris Dzhingarov - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2022 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

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