A new year has started, which means Forex traders will be fuelled with ambition and determination to make 2024 their most successful 12 months yet.
Whether they hope to pass a one-step evaluation and get accepted by a prop firm, so they can start playing with larger sums of money, or they have goals of earning a certain amount of money before the year is out, the challenges they set themselves are likely to spur them on to do their best this year.
And one thing they could use to help them with their endeavour is artificial intelligence (AI) and machine learning.
The rise of AI in 2024
Though many people are fearful of the adoption of AI, it is more than likely that the technology will continue to develop and expand over the course of the year.
In fact, it is set to be used in many industries, including the medical sector, commercial offices, engineering, and finance.
LinkedIn has predicted AI systems will be used to process different forms of content, including 3D, audio, text and brain activity.
The article stated: “2024 will be the year we see businesses use these AI systems in real-world settings, ranging from conversational interfaces to autonomous systems.”
It added: “Such systems will revolutionise industries such as healthcare, education, robotics, and e-commerce and transform how we interact with the world around us.”
AI applications that are likely to become more common over the year include creating smart content and personalised learning in education; automated vehicles; and robotics that can carry goods, clean offices, or perform inventory management.
They can also be used for human resources, such as finding the right candidates; and in travel and transport through route planning analytics and intelligent traffic management.
Businesses are clearly seeing the use of AI, with Statista predicting the AI software market will reach $126 billion (£99 billion) by 2025.
What’s more, the percentage of companies using AI has already grown by 270 per cent over the last four years.
AI’s influence will also reach the finance industry, with four-fifths of banks being aware of the usefulness of the technology. This is thanks to its customer engagement, including online chatbots, facial recognition security systems, personalised content recommendations, and fraud detection systems.
However, it is also being used to manage risk and offer investment advice, being able to perform analytics and garner information about trends that could be useful for investors.
How can AI help Forex traders?
Far from being afraid of AI, Forex traders should learn how to embrace it and utilise it for their own benefit.
Indeed, they are most likely to already be using the technology without even realising it, with 90 per cent of successful Forex traders reaping the rewards of machine learning in the foreign currency markets.
However, it is important to use the technology as much as possible to really get the most out of it.
Here are some ways AI can help traders:
1) Create patterns
Thanks to its analytical abilities, AI can be used to look for patterns in the markets. Instead of focusing on one market at a time, it is able to scour several trading markets at once.
Therefore, it can provide analysis of lots of data in real-time as well as look at historical information, and use these to determine patterns.
By being able to understand what patterns are emerging, this will help investors determine how to play their strategy and what their next move should be.
2) Speech recognition
Another way AI is used in Forex trading is with its speech recognition tool. This allows traders to search for market insights, scouring lots of financial data to get the information they need.
3) Automate tasks
AI allows traders to have a more hands off approach as they can automate a considerable number of their tasks. This enables them to spend their time focusing on watching the market closely and determining when to exit or enter.
The technology can even do more complex tasks with the help of machine learning, such as analyse potential trades, create an effective strategy, and take action.
Machine learning can also help AI improve their trading plans over time, adapting it according to the events.
4) Create predictive models
All Forex traders want to feel like they are ahead of the game, which is why they are likely to favour AI platforms in 2024.
Here, the technology can use algorithms along with recognising patterns through data analysis to come with predictions about the market.
AI does not just look at the currency pairings, but other factors, including economic and geopolitical events going on around the world.
It can also look at market sentiment and analyse things like social media posts, online forums, and new articles to determine what the feelings of other traders are.
“This gives you valuable insights regarding how traders are likely to behave so you can fine-tune your trading strategies accordingly,” a LinkedIn article stated.
By developing predictive models, this can help traders predict prices in the future, so they know the best time to enter or exit a trade, and they can estimate stock rankings.
This also helps them be in a better position compared with other Forex traders who might not be using an AI platform, enabling them to trade at the most opportune time.
5) Add a volatility filter to strategies
The great thing traders will discover about AI this year is they can tailor the technology to suit their needs and wants.
For instance, they could add a volatility filter to their AI, if they think the volatility of a market is the main thing that affects their profit margin.
This filter will prevent the AI from making trades when there is a high risk of a volatile market.
6) Reduce risk factor
The reason AI is being adopted across so many industries at the moment is because of its ability to acquire a considerable amount of relevant information and use this to determine the best course of action.
When it comes to Forex trading, it analyses this data and provides a thorough insight into the market, helping to lower the risk involved in trading, as the greater amount of data, the more confident traders can be about their actions.
While traders have historically entered and exited trades without AI, they cannot acquire or analyse the same amount of information as AI in the same amount of time. Therefore, by acting without it, they are taking on more risk.
The good thing about AI is that it can be used to create stop-loss orders that automatically exit a trade at a certain price point. Therefore, there is no chance traders will find themselves in a trade after the point they would have wanted to leave if they happened to take their eye off the ball for one second.
This allows traders to take a break from the markets every so often, as they can rely on the systems in place to act on their behalf.
As the job has historically been seen as one that takes over a person’s life, as the markets are open 24/7, 365 days a year, this can help traders have a bit of a better work-life balance, as they do not have to be on call every waking second if they know the AI is working for them at the most crucial moments.
7) Look at multiple markets
Last year might have been the year you focused on one financial market, but why not use AI so you can work across multiple markets in 2024?
Thanks to the capabilities of AI and machine learning, traders do not have to restrict themselves as they can analyse data and determine predictive models across several markets all at once.
Therefore, this gives them the opportunity to benefit from price movements in more than just one place, potentially exponentially increasing your profits.
8) Algorithmic trading
We are all used to algorithms these days, particularly when our online search history seems to affect our social media adverts.
However, algorithms can be very useful to traders, as it improves the efficiency of trading and speeds it up.
For instance, traders can use algorithms to look through all the historical data, trends, profit/loss ratios, and scan the markets and news articles quickly. It can filter through the data to find the most relevant information at a speed humans will never be able to compete with.
Although traders could spend the time to look over the data themselves, they will soon be competing with others who are utilising AI to their benefit, and acting far more quickly, as a result.
By the time traders using their own analysis are ready to make a trade, the conditions in the market might have already changed. While humans can only analyse one thing at a time, AI can look at multiple markets and websites before they have even begun.
This form of parallel processing is what is going to make algorithmic trading so appealing to Forex professionals this year. After all, “the possibilities you can obtain are ostensibly endless by leveraging AI in algorithmic trading”.
In a world where humans are increasingly unable to compete with technology, anyone who does not adopt the latest computer trends will be certain to fall behind others. So, if you want 2024 to be the year you smashed trading targets, it is a good idea to take a look at AI options.