Technological advances have significantly transformed the global financial landscape, including the Forex currency market. Today, the potential for forming and developing forex trading trends is particularly influenced by the active introduction of AI/VR/ML. After all, they accelerate the process of selecting the optimal further trading direction for players and increasing profits. Such structural changes force many jurisdictions to revise licensing rules, approaches to regulation, and traders and brokers to constantly monitor such transformations.
Future Direction of Global Foreign Exchange Market
According to Bis.org, in 2022, the daily trading volume on Forex reached $7.5 trillion. The main currency (88%) in the conducted transactions was the US dollar, followed by the euro, Japanese yen, and pound sterling. Traders most often chose spot transactions – 28%, and forward transactions amounted to 15%. The UK, the US, Hong Kong, Singapore, and Japan are the main players in the foreign exchange market, accounting for up to 80% of all trading activity.
IMAC Group in its research report stated that the market is expected to grow to $11 trillion in 2028, with a CAGR of 7%. The study says that the US and all of North America will remain the major players, influenced by the new forex technologies used by players. The EU and Asia will be in second and third place in terms of trading volumes.
Using AI and ML in trading
Today forex technology providers are intensively introducing AI and ML elements into automated trading systems. Since they can easily and instantly model the future direction of trading, and then offer recommendations in conducting transactions.
Such technologies allow traders to:
- Analyze large amounts of data in real-time in fractions of seconds.
- Avoid losses, ML algorithms can indicate potential market declines and the need for a player to adjust strategy.
- Conduct round-the-clock trading, setting certain parameters, and acceptable risks, the trader no longer needs to monitor charts for 24 hours.
- Exclude emotions during volatility, do not give in to momentary moods.
Analyze the history of transactions, and offer new variations based on the user’s preferences.
Big data generation
For the financial market, big data is crucial. Banks can track fraudulent transactions, and Forex players can analyze the market and establish new Forex market trends.
Traders can generate, process, and store large amounts of data by using cloud computing technologies and storage bases. Conventional software cannot cope with such a task.
The sources of big data are:
- News about significant world events (economic and political).
- Price indicators (both historical and current levels).
- Information about GDP, inflation rates, and employment (Fed rate setting).
- The general mood of trade participants.
- Market research.
By applying big data, users can more accurately determine the future direction of the market and react to changes in time.
HFT as a popular direction
One of the effective forex trends has become the use of HFT. Conducting this type of trading requires powerful PCs and up-to-date software.
Key characteristics of HFT:
- Great speed of order execution, only a few seconds.
- Carrying out a significant volume of transactions at a time.
- Most often used by banks, large financial structures as they have powerful technical resources.
Technologies are constantly improving and becoming available for ordinary players, and HFT trading has all the chances for wider application and spreading.
New era with Blockchain and cryptocurrencies
Blockchain and cryptocurrencies have also influenced forex trends.
Blockchain provides players with a guarantee of transaction security, confirmation of the reliability of information, and no possibility of making any changes (amount, date, etc.). There is no need for intermediaries to confirm transactions, thus increasing the speed of settlements.
Cryptocurrencies, even despite the volatility, are actively used on Forex. Virtual currencies serve as an alternative to traditional money while providing a wide range of choices, as well as giving access to transactions without banks. Traders can also use them to diversify their portfolios.
Tools for text analysis
NLP can be applied to improve trading strategies. This technology helps to quickly analyze large amounts of text from news, articles, social networks, and financial reports. NLP can determine the general mood in the market, and forex trend indicators in the context of a particular currency, or asset, which is of interest to the trader.
The main disadvantage of NLP is accuracy. NLP analyzes the text, the question is the source of information itself and the reliability/truthfulness of the data described in it.
NLP in conjunction with other tools gives the trader a quick study of market trends.
Adaptation of regulators to changes
The huge multi-billion dollar Forex market is constantly evolving, players are looking for new tools for analytics, and regulators are looking for opportunities for full protection of users’ capital, and timely control of brokers’ and platforms’ activities. Regulators’ main goal is to quickly adapt to what is a trend in trading and develop new principles of work.
In the USA, brokers are authorized by the National Futures Association (NFA). The NFA has developed strict guidelines for the broker’s record keeping and capital.
The general legislation for operating in the EU area is MiFID II (Markets in Financial Instruments Directive). In addition, all market participants must be approved by the regulators of the jurisdiction in which they will operate.
In Great Britain, there is a regulatory body – the FCA. A mandatory condition for brokers is to obtain a forex license from the FCA, which is quite difficult, as the FCA requires compliance with a large number of rules and transparency of participants’ activities
Also one of the big players on the market is Singapore. MAS operates here. Department, which reviews applications for licenses and monitors the activities of participants.
The market is growing and developing, so participants expect that regulators will only increase control and impose new requirements for obtaining a license, including the availability of capital. In addition, new technologies, and threats of hacker attacks, will undoubtedly entail certain technical requirements.
Using Mobile
Another popular forex trend today has been the use of mobile applications. Free access to the internet and widespread use of mobile devices has forced many Forex platforms to adapt their trading tools for cell phones.Such mobile offerings are as good as working on a PC, as well as charts, analytics, notifications, online transactions, opening a demo account, etc.
Protection from hacker attacks
Whatever the new forex trend trading, traders need to take care of cybersecurity and brokers need to take care of data protection.
The most common cyber attacks are aimed at obtaining personal data of players, and records of transactions (these are phishing attacks and malware). DDoS attacks are also used to destructurize the work of platforms and gain control over trading.
To protect against hacker attacks, they apply multi-stage protection such as data encryption, and two-factor user verification, install systems that respond to threats in real time, and use AI tools to predict potential attacks.
Enhanced control of regulators
Forex is considered a decentralized and dynamic market. This means that there is no single regulator that controls, manages, or monitors this structure. Globally, each jurisdiction sets its own rules (audits, financial reporting) and regulations (capital size, technical specifications).
The main threat to Forex is fraud and unlicensed activity. After all, there are millions of traders working in the market and their capital is the target of attackers. New trading trends also require a detailed approach from government agencies to assess potential threats.
The main regulators in the world are recognized: the UK FCA, the USA CFTC, Cyprus – CySEC, and Australia – ASIC.
Their functions include checking the work of brokers, compliance with local and international legislation, creating a transparent and fair environment for trading, and introducing additional protection measures for clients’ investments.
Continuous learning
When choosing a broker, a trader needs to find out about support and training opportunities. Forex is a market in which, to achieve success, it is necessary to constantly learn new tools, technical analysis, and charting.
For newcomers to the market, it is especially important to have support from the broker (telephone, video communication, etc.) to solve non-standard situations in the market or to get advice on unclear issues. It is important to have a demo account available for training on the broker’s platform.
Now there is a wide range of webinars, online courses, trainings, and books, which help new market participants to better understand the system of work. Constant training is the duty of every trader.
Other trends
Among the emerging new trends in trading it is worth highlighting:
- Creation of common global rules of work in the market, and establishment of common trading standards.
- Division of licenses into several types, and classes (by types of assets, amount of capital).
- Strengthening the transparency of activities, and responsible marketing.
- Growth of P2P platforms, absence of intermediaries, reduction of commissions.
- Use of new technologies to analyze several types of assets at once.
- Application of gamification and VR elements, which allows to immerse the player in the environment and makes the trading process interactive.
Summary
The integration of new technologies such as AI, ML, big data, NFT, and NLP with traditional trading models is aimed at minimizing costs and enhancing the results of successful trading.
Design elements and, the application of VR all serve to deepen immersion in the environment and increase interest in the process itself.
As each jurisdiction now sets its own rules, and types of licenses, traders and brokers want to achieve from regulators the formation of uniform rules, and trading standards.
Despite the automation of trading and the use of various software, a trader constantly needs to learn, as there may be various unforeseen situations in the market when it is necessary to react immediately to save your capital.
Constant training and application of innovations with already formed methods of work on the market will help any trader to achieve success.