The Automation Revolution: How Tech has impacted Forex Trading

10/05/21
5 min

How Tech has Impacted Forex Trading

Discussion Points:
  • How technology has changed the Forex Trading landscape
  • A look into the future of Forex trading

Seasoned traders, investors, day traders, and newcomers, all have one thing in common. From the moment they wake up until they go to bed, they check how the market is performing. This is a critical aspect of trading that technology has impacted.

In particular, the foreign exchange market has greatly evolved with the increasing adoption of advanced tech. This evolution has been key in contributing to the flexibility and life-balance most Forex traders look for. It is, for this reason, we are going to share our insight on the automation revolution in the world of trading. First, here is a shortlist of technological developments and tools that made a difference.

  1. Electronic stock exchange
  2. Online trading
  3. Online brokers
  4. Smartphones
  5. Finance apps
  6. Big data and algorithms
  7. Social media
  8. High-frequency trading
  9. Robo-advisors
  10. Artificial intelligence

How Traders Benefit

Most of us take much of these for granted in our daily lives and in their business applications. Little do we know that without this tech, much of the routine Forex traders enjoy today would not exist. Aside from the technical way forex trading has changed, here are some of the intangible advantages for traders:

  1. Flexibility – and that is a big one
  2. Work-life balance
  3. On-the-go lifestyle
  4. More informed decision making
  5. Faster decisions

These points, and others, have contributed to the new forex trading landscape. So what exactly has been transformed, improved, or simply added in the digital age for Forex trading, and is it all good?

If we’re going into the nitty-gritty, here are some aspects worth mentioning.

Accessibility and Democratization

Another result of new technology is the democratization of trading and trading platform services. Tech has played a central role in opening trading up to everyone, before it could be said it was exclusively reserved for institutional players and experts. Today, access to trading platforms is easier and more transparent than ever. Electronic platforms are accessible to a broad base via white label providers using someone else’s tools. Thus, small providers can offer a variety of services and reach new audiences, specialists, and non-professionals alike.

Competitiveness

The increased accessibility has therefore bolstered competition. And the smallest, newest providers, need to offer the latest tech at all times. The competitive landscape allows for further accessibility and the ability for newcomers to choose one provider over the other based on the features of their platforms.

Flexibility and Freedom

By far, the main attraction of the field to all newcomers as well as experienced traders is the ability to generate income without being tied down to a desk job. Where there is an internet connection, there is trading. Traders are now able to check the news and market data, set and monitor trades from anywhere. This gives them freedom, flexibility, and most importantly, mobility. As a result, traders are becoming more efficient.

Fast and Automated Executions

Financial markets and trading in particular have benefited from automation at various levels. From the back office to the dealing desk, what used to be a manual transaction operation, is now fully automated and digitized. This has increased the speed of execution and eliminated the need for dealer intervention, thus reducing potential human errors. Also, the ability to set the trade, and let the strategy play out while focusing on something else, takes emotions out of the equation. Or, at the very least, decreases its impact.

High-Frequency Forex Trading

In this day and age, it is high-speed everything. And so fast orders and executions are just as important in the financial markets. Traders are now leveraging high-frequency financial data to be the first movers on the best prices. Digitization has made this possible. However, evidence shows that high-frequency trading is creating volatility and chaos in the market triggering automated orders. So, keep in mind that using technology for the sake of it is not an efficient way. Strategies and risk assessments are still necessary.

Erratic Markets

Indeed, not everything tech is beneficial if used without proper planning. Due to automation and high-frequency trades, many stock movements are triggered by false signals. And because data transfers are operating at high-speed, misleading information can spread fast and result in market shocks. Automating certain aspects of the market leaves control in the hands of algorithms and tech tools.

A Look into the Future of Forex Trading

Several factors affect forex rates, including political stability, debt, disasters, inflation, and others. It’s therefore critical to stay updated to evaluate risk and make timely decisions.

Today, traders can access information and the latest international news with ease. Also, the democratization of trading tools and platforms, means that anyone – not only experts – with a good internet connection can trade from their favourite spot at home or on the beach.

From accessibility to speed of executions, and artificial intelligence, the landscape of the foreign exchange market will continue to evolve. Even robots are being used to determine optimal conditions for trades. In addition to their ability to automate orders and manage profit and loss. Robo-advisors are bound to become more popular and widely used. One of their main attractions is the reduction of human error and emotion. This is the kind of disruptive technology that helps traders generate profits where they couldn’t a few years back.

If we try to predict what the future holds for the industry, we see that the first in line for additional improvement is the internet network. The implementation of the 5G network will motivate high-frequency forex traders to make faster decisions. Moreover, forex trading is set to become even more accessible to new audiences across the world.

The most tech-savvy traders will keep an eye out for every avant-garde tech and app that is released. Technological advancement is putting life-work balance and freedom on the fast track for all investors and traders. Join the future of trading, join AIKO Markets!