Using AI to transform forex trading strategies

Artificial Intelligence (AI) has made a huge impact onthe forex trading and investing experience – as it has doneacrossother industries in the UK and worldwide. AI is widely reported on, with positive and negative press ranging from how it can contribute to the economy or raise concerns about replacing people’s jobs. However, when used effectively, it can be game-changing.

So, how has AI transformed forex trading strategies? For starters, it allows individuals to access sophisticated analysis functions,and with the increasing availability of trading apps designed to improve user experience, this is set to improve further.

Thanks to AI, forex trading is now more accessible, as it can fill in skills gaps and help traders of all levels execute trades with easedue tohelpful analysis, automated processes and more. When considering the fast pace of forex trading, this is a huge bonus.

Automated trading systems

AI can also be used for quantitative testing used to develop trading systems that analyse vast amounts of data. This includes past and real-time data.

From there, patterns can be detected and if you opt in, you can even allow trades to be executed automatically.

As we know, speed is integral in forex trading, so the use of machine learning to implement these manual tasks could enhance the trading experience, taking certain tasks off traders’ hands. It also reduces the level of emotional attachment to trades, which may otherwise hold some individuals back.

Predictive analytics

Much like thetechnology behind predictive text on our phones, predictive analysis allows traders to make moves more quickly – and with useful informationto hand.

For example, machine learning models can adjust to changes in the market by identifying even the smallest of patterns that a human might not pick up on. This allows traders and investors to ensure they never miss an update, making them less subject to human error, or less dependent on looking out for relevant coverage.

Having AI-driven data and analysis at your fingertips means you can make more informed decisions about which direction the market is gravitating toward.

Sentiment analysis

Forex markets receive wide coverage from all over the globe but to the extent that it can be tricky to pinpoint the most relevant insight – and particularly from certain markets that receive less coverage.

AI can be used to compile key insights from a wide range of sources, including news articles and even social media. This is done with sentiment analysis algorithms. With very little effort, you can get AI tools to source relevant information and have it compiled in one place to get an idea of how a certain market is being perceived. This includes insight into what traders are saying.This level of insight can be invaluable for predicting market movement.

There should be a clear understanding that this will not guarantee results, however, it can certainly help you make more informed decisions that might prompt you to alter your strategy.

Risk management and portfolio optimisation

Risk management is key to successful trading and investing. Knowing when to make certain moves can be invaluable, causing you to either profit or experience a loss.

AI algorithms can be used to outline the risks that might come with each trade, allowing you to change position sizes as you see fit. Certain market conditions may prompt you to increase or decrease exposure, for example, in a bid to limit potential losses or increase potential profit.

Risk management is part of creating a diverse portfolio and AI-driven tools offer a great way to leverage this.