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The use of Artificial Intelligence is immeasurable. It has already impacted almost every segment of our lives. AI helps us get real-time feedback from brands; it automates most of our daily activities, thus reducing the risk of human error.
One of the markets that benefit from AI and Machine Learning most is forex trading. The first online forex trading website was designed in 1996 and empowered the first generation of online retail traders to partake in the largest market in the world.
Since then, retail forex trading has reached $282 billion of daily turnover. Recent studies show that $5,3 trillion is traded in this market daily. High liquidity, low costs, ease of entry, a variety of pairs to trade, but in order for traders to understand the disadvantages of the market and minimize the risk of failure, they must rely on AI.
Stats have shown that 90% of successful forex traders use machine learning to make profits. Let’s take a deeper look at how AI is transforming the forex industry.
Equipping Traders with The Right Tools
A wide array of algorithmic tools based on machine learning are being leveraged in Forex today, including:
- Support Vector Machine
Support Vector Machine or SVM is a data classification machine learning language. Due to its ease of application in data classification challenges, SVM has gained prevalent acceptance. This language works by splitting data sets using decision boundaries.
SVM is used to assess or forecast if a market trend is bearish or bullish using this method in forex trading. That’s accomplished by determining a hyper-plane between a trend’s highs and lows. The forward hyper-plan represents a bullish trend, while a backyard hyper-plane represents the bearish trend, then categorizes fresh data using the hyper-planes.
- Neural Network
Neural Network in Forex is a machine learning way of analyzing the market data (technical and critical indicator values) and tries to forecast the target variable (trading results, close price, etc.). Neural networks work pretty much the same way our human biological neurons operate.
Forex operates on two primary issues of contention: the forex regression issue, in which traders attempt to anticipate future trends, and the forex classification issues, in which they attempt to predict whether a trade will be successful or not.
Personalized Trading Experiences
2018 was an important year for traders. It was then when they started to put a lot of accents on mobile trading. Back then, most Forex brokers had their own purpose-made mobile apps designed, such as the FXTM Trader App, which permits traders to open new trade positions, deposit and withdraw, and track potential profits from their smartphones. Yet, a great number of mobile trading apps meant it was challenging for traders to determine and distinguish between various app capabilities.
AI has all the means to set brokers apart in the field of mobile trading. FXTM understands AI’s ability to change the world of mobile trading and has started to explore new methods that could improve its products and services. From assisted education to personalized trade analysis, artificial intelligence is set to revamp how traders and brokers interact with their mobile trading apps.
Improved Predictive Analytics With AI
Forex trading companies are still researching AI’s ability to forecast changes in the forex market. Nikkei, a Japanese enterprise, has recently used AI to forecast Dollar-Yen exchange rates.
The app predicted the value of USDJPY in a month’s time, and this estimate was compared against the firm’s top analysts. The software a value that was 0.05 away from the correct value, winning over the company’s best analyst, whose guess was off by 0.6 from the correct value. The software uses natural language processing and tremendous amounts of data from the company’s trends, articles, market indicators, and commodity prices.
Low-Risk Potential Thanks to AI
When it comes to the forex industry, AI has all the means to reduce overall risk. On-time stop-loss orders, which have become ordinary in the trading environment, sell off assets once they fall below a certain price and represent a danger. Other than AI, a strategy that could help you avoid the risks is the use of low spread Brokers which can help you reduce trading costs, especially if you’re a high volume trader.
The extensive applications of AI in forex trading are likely to bring similar results. Your decision as a trader can be influenced by many variables, including fake news, political news, fear, and more. But using AI can help you make more informed decisions, where you can articulate an idea of what the markets might look like without added instability from external factors.
Even though Artificial Intelligence is still in a developmental phase, it looks set to revolutionize online forex trading in 2021 and beyond. It has all the means to create personalized client-centric user journeys, potentially decrease the emotional impact on trading decisions, and create informed decisions with enhanced predictive analytics.
It also would not be wrong to say that machine learning-based technologies help traders improve their personal life. Since the market is available 24/7, forex traders have to stick to their computer screen for most of the day to watch prices and make effective trades.
That means forex traders need to sacrifice a great deal of their personal time, not to mention their health. But with AI automated tasks, traders are able to save a lot of precious time without compromising on trading quality.
There are already several tasks that have been assigned to the human mind that are already performed by AI – in a process that promotes the replacement of human labour with industrial machinery. The trading industry is a great example of how AI is already working on different levels.
The exchange market is one of the world’s largest financial markets, and it isn’t going away anytime soon. Both machine learning and AI have been game changes in the field of Forex trading with its expeditiously automated trading, which requires no human mediation and provides in-depth analysis, forecasting, and on-time execution of the trades. And for reducing the risks, machine learning plays a crucial role in shaping the future of Forex trading