The Role of Technology in Transforming the Foreign Exchange Market: How Automation is Changing Currency Trading
When you want to choose a forex broker that suits your needs, you check every single piece of information you can find. You read every review on Oanda or other platforms online, then try to compare them to make sure you select the right one. But before you start trading forex, it’s crucial to know how the foreign exchange market has changed over time and why technology is the driving force behind it.
You might’ve noticed that a lot of forex trading processes rely on automation nowadays. Automating trading activities streamlines trades and makes sure you can focus on other things while your trades are unfolding. But how exactly did technology change the forex market? This article will tell you everything you need to know.
Financial Technology in Currency Transfer Processes
Currency trading is nothing new. In fact, humans traded technology as soon as currency was born as a way to pay for different services and make exchanges. The entire currency trading thing didn’t gain traction as well as it did when the Medici family opened the Medici Bank in the 15th century. This allowed for foreign exchange to take place. Nowadays, currency transfers are more advanced, and this is in part thanks to financial technology.
Financial technology innovations have shifted the way currency transfers take place. Basically, they brought technological progress that helped forex improve at the same time. Some of these innovations involve machine learning and artificial intelligence. As such, the price associated with transferring currency has decreased, all while bringing more transparency. There are several financial technology innovations, but the most popular ones include automated trading, peer-to-peer lending systems, and online payment platforms.
Thanks to all these fintech solutions, currency transfers in the forex market are safer and more efficient at the same time. Transactions are faster while costs for transactions are much lower.
How Technological Advancements Changed the Forex Market
Not everyone is aware of how technological progress shaped the forex market. One thing that made a difference was automation.
In currency trading, automation allows you to perform trades by setting up some parameters and letting the robot do the trades on your behalf. It eliminated the need to glue yourself to your computer all the time. Besides, it also makes transaction times better and makes trade execution faster. With automated traders, you have easier access to the forex market. Human error is reduced as well, because emotional influence is removed from the process.
Furthermore, automation also makes it easier to manage risk. There are certain risk management protocols that take market data and analyze it in real-time. As such, traders have the opportunity to make better decisions and prevent huge losses.
Machine learning and artificial intelligence also played a big role in changing the forex market. With the help of machine learning, artificial intelligence software is able to learn from successful and unsuccessful trades, learning lessons and figuring out what to do moving forward. Not only that, but AI is able to scan through a lot of data in a few seconds, providing information that humans often overlook.
High-frequency and algorithmic trading influenced forex trades as well. Algorithms will always take a look at the news and tell you when a huge event has influenced certain currencies, allowing you to make better-informed decisions. HFT, on the other hand, can perform trades at amazing speeds to bring you more profit.
Final Thoughts
The forex market changed a lot over the years thanks to AI, machine learning, HFT, algorithmic trading, and also automation. We will probably continue to see more of a shift in the future.
