For longer than most people realize or appreciate, artificial intelligence (AI) technology has been advancing steadily into our everyday lives. Of course, every IBM follower is no doubt familiar with Big Blue's flagship AI Watson, which is known as something of an AI ambassador to the world. To the broader public, however, the real-world applications of AI still remain mysterious and somewhat vague.
For example, they may recognize that AI plays some role in powering the digital assistants that we've come to rely on. Or, they may see AI as what's behind some more complex industrial technologies. Mostly, though, people seem to regard AI as some kind of emerging threat.
In some corners, though, AI is being embraced as a game-changing technology without any hesitation. One example is in the high-stakes, high-risk world of foreign currency exchange, or Forex. It's a market that has long been at the bleeding edge of technology, as traders look to gain an advantage – any advantage – over their peers. Here's how AI is changing the rules of the game for Forex traders.
Accurate Short-Term Predictions
One of the ways that AI is changing the forex market is with its' ability to ingest large amounts of data and make accurate predictions about short-term market movements. While that may not sound like a big deal, it's the kind of thing that can enable traders to make a large sum of money over very short periods of time. According to the experts at Forex Academy, that's because the forex market (unlike stock markets and commodities markets) is volatile and unstable by default. In other words, the relative value of a single currency pair can fluctuate a great deal throughout the day, and anyone who can time those swings can execute trades at exactly the right moments. An AI, unlike a human, can use real-time data streams to predict such movements and provide actionable trade guidance to enhance results.
Although AI is helping forex traders profit on fluctuating currency value, there's also some evidence to suggest that widespread adoption of the technology is even starting to decrease the volatility that has been the hallmark of the market since its' inception. That's because as more traders turn to AI-assisted trading platforms, they're less apt to make trades driven by emotion and panic. Instead, they're following the AI's advice that's based on hard data, which eliminates some of the human factors that drive the market's instability. In other words, an AI's ability to be rational means that it helps traders to make sound decisions, which are, in turn, better for the market as a whole.
Enhancing Trade Automation
One of the major problems that forex traders have always faced is the fact that they're dealing with a global market – and that means it's never closed. Historically, traders have dealt with that by reducing their positions when they're not actively trading, and by hedging their bets with stop-loss orders to prevent losses when they're not around to execute trades themselves. AI, however, is taking those basic strategies and improving on them, enabling true trading automation for the first time. It has enabled a vast array of trading robots that can make real-time decisions based on a trader's risk tolerance and investment goals – and that can do it 24 hours a day. It means traders can turn over their portfolios (or parts of them, depending on their comfort level) to an AI trading algorithm and let it execute data-based trades around the clock, with no intervention needed.
An AI-Powered Moneymaker
It's hard to say why forex traders, in particular, are so eager to embrace AI. It could be that their tolerance for risk means they're used to jumping on new trends early. It could be the lure of beating the competition to the punch. Most likely, though, it's because they recognize the power of AI to help them make more money, and they've seen it in action enough to know how valuable it is. In that way, the forex market is demonstrating the real-world power of AI technology, and it should serve as an instructive lesson to the general public. After all, if professional money traders are willing to put their fates into the hands of an AI, maybe the rest of us should relax a bit and embrace the technology with a bit less fear, too.