Today’s business and financial markets are driven by a number of technological trends, from machine learning and artificial intelligence (AI) to big data. Interestingly, the lines between these trends are also becoming increasingly blurred, with big data playing a particularly prominent role in AI applications across the globe.
The big data analytics market is also set to reach a staggering $103 billion by 2023, while it’s estimated that poor data quality costs the US economy alone up to $3.1 trillion on an annual basis.
With these points in mind, it’s no surprise that big data has begun to have a significant influence on the world’s financial markets. But how is big data changing the forex landscape and why is this important for traders?
How is Big Data Changing the Forex Market?
In simple terms, the deployment of big data in the forex market has improved trading capabilities significantly, with increasingly sophisticated algorithms underpinning concepts such as automated and high-frequency trading (HFT).
This represents a marked change in the forex market, with traders increasingly able to eliminate human involvement (and subsequently error) while optimising trading volumes and performing more complex transactions.
Even on a fundamental level, big data is helping traders to access information from a wider and more diverse range of sources. This includes historically disorganised dataset sources, including social media sites such as Twitter, Facebook and Linkedin.
By collating, organising and analysing data from such sources, traders can subsequently gain a deeper insight into the forex market and make more informed decisions going forward.
Overall, the advent of big data has created a more accessible marketplace, and one that’s far easier to control from a trader’s perspective.
This may also help to eventually tackle the issue of centralised control in the forex space, which remains a controversial talking point in terms of market manipulation and regulation. Make no mistake; big data and the use of algorithms could fill this void in the future, by providing an objective and immutable overview of the market as a whole.
Why is This so Important for Traders?
We’ve already talked about how big data has contributed to a more accessible and efficient marketplace, which will hopefully make traders incrementally more profitable in the future.
From a practical perspective, the use of big data also minimises the risk posed to individual traders, which is a key consideration whether you’re investing in currencies, commodities or equities.
Quite simply, it’s far easier to pre-empt and manage risk when accessing a wide range of data, as this helps you to understand the potential impact of negative outcomes and allows for the introduction of effective management measures.
Of course, modern-day risk management also involves technologies such as advanced learning and AI, with tools such as stop losses offering a relevant case in point.
Available on all virtual brokerage sites, this tool creates the provision for automatically closing positions once they’ve incurred a predetermined level of loss, depending on the nature of your order and the amount of leverage involved.
So, you can choose to automatically close a position at an optimal and carefully chosen point, helping to strike the ideal balance between risk and reward in the forex market.