The role of AI in Forex trading

by Jones David

Artificial intelligence (AI) is one of the single most important technological innovations of modern times, and one that has already had a seismic impact on a number of industries across the globe.

Most recently, a new AI study carried out by Western University has made the first systematic attempt at using machine learning to predict relationship satisfaction over time. This could help to reduce the average divorce rate of between 40% and 50%, by revolutionizing online dating sites and the fundamental way in which people are matched.

AI has also had a seismic impact on forex trading (and similar financial markets), but how has this evolution unfolded, and what’s next within the space?

What is a Forex Trading Robot?

AI certainly underpins modern-day forex trading robots, which are essentially computer programs that are directed by built-in algorithms.

Historically, forex trading robots were static in their nature, allowing for automated and predetermined trades without the direct intervention of investors. However, they weren’t adaptable or capable of being changed according to the analysis of real-time market conditions and price movements.

The advent of AI has definitely improved forex robots, by introducing concepts such as machine learning and predictive analysis. As a result of this, contemporary forex robots tend to be more dynamic in their nature, enabling investors to alter the underlying algorithm and alter their strategy in real-time.

Thanks to technologies such as predictive analysis, which is central to AI and capable of making assumptions and providing informed insights.

With these technologies, forex robot algorithms can analyze large swathes of data and provide more accurate guidance to traders, while also offering market insights that are far beyond the capabilities of human analysts.

How Else has AI Impacted on Forex Trading and What’s Next for the Market?

The concept of data gathering and analysis in an intriguing one, as AI has the potential to collate disorganized datasets from social media sites.

Make no mistake; these resources are home to millions of global traders and increasingly trusted news sources, and analysis of such data can lead to new and accurate trading insights.

Over the years, AI has also revolutionized global trading platforms such as the seminal MetaTrader 4. Apps such as the MT4 have benefitted from the addition of increasingly sophisticated technical indicators and analytical tools, many of which leverage AI to make forecasts, predict market movements, and capitalize on real-time trends.

On a similar note, AI has played a pivotal role in minimizing risk for traders and negating losses during, particularly turbulent or volatile times.

The best example of this exists in the form of stop-loss orders, which are AI algorithms that automatically close open positions once they’ve incurred a predetermined level of loss (or prices fall below a particular level).

This is crucial given the volatile nature of the market and its margin-based trades, which can cause investors to lose far more than their capital holdings in instances where they’re unable to successfully manage risk.

In the future, AI is likely to become even more influential in the forex market, which is increasingly reliant on machine learning and predictive analysis as a way of avoiding emotive trades.

One particular advancement will see the emergence of even more sophisticated algorithms that can collate complex data in real-time from a multitude of sources, allowing for accurate short-term predictions and negating turbulence in the day trading market.

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