Big Data Eases the Burden of Small Forex Traders

Things are much more seamless for small forex traders with the help of big data and predictive analytics. Here's why that's important.

October 7, 2018
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Last year, my colleague Ioana published an article here on the benefits of predictive analytics for the forex industry. She made some very good points about the opportunities that big data and AI offer forex traders. Other experts have shared similar insights.

Megan Mary Jane has published a point about the role that predictive analytics and other big data applications have on the industry. Mary Jane is one of the few experts that has pointed out that it helps investors and brokers alike. Predictive analytics allows brokers to make small scalping decisions, which helps them boost their profits slightly.

Big Data and Predictive Analytics Are the Future of Forex

If the subject of investing fascinates you, it is possible that you have an idea about forex currency exchange and maybe you have interacted with a trader. Generally, it is all about selling and buying currencies to make money. The fluctuations in currency pairs allow you to make profits.

However, many prospective traders lack the sufficient knowledge to help them participate in this lucrative and challenging investment opportunity. Basically, this is not a career for every jack dick and harry, and understanding what you are diving into is essential as it can lead to a stronger resolve or a change of heart.

The good news is that big data is making their lives easier.

Forex currency exchange is not a get rich quick scheme. But Big Data Makes it Easier to Make a Living

The notion that you will grow your forex account to a million dollars in two years is an illusion. In fact, if your main agenda for investing in forex currency exchange is to get rich quickly, it advisable to reconsider your options. Generating astronomical returns from FX trading over a short time is an expectation that should be left to people looking for unrealistic wealth generation plans. Basically, the forex market is full of factors that are not within the control of traders but they directly influence how much you can generate.

Most importantly, expecting to win easy money leaves you exposed to pitfalls that lead to more losses than profits. If you are serious about this venture, it is crucial to understand that it is no different from other careers that call for discipline, hard work and lots of patience.

If you want to generate consistent profits, it is of utmost importance that you concentrate on the entire journey as opposed to the rewards at the end. Doing this will enable you to focus on testing various trading systems in order to determine if they are fit to help you in creating a long-term source of revenue. At the same time, it helps you stay emotionally balanced even when you’ve been facing a streak of losses and control the excitement when you win. Basically, it is about learning important lessons that form the basis for making profits.

Fortunately, as Mary Jane points out, using predictive analytics makes it easier to shorten the learning curve. This allows people to boost their edge. This is especially important as they compete against a very consolidated base of institutional investors.

Leverage is a double-edged sword

While opinions are varied, forex currency exchange in itself is not very risky since the currency pairs on the market seldom fluctuate for more than 2%-3% for sustained periods. Nevertheless, using leverage increases the risk tremendously since you can find a leverage of around 50:1. Basically, this implies that you only need $1,000 to control currencies valued at $50,000.

To illustrate, this leverage means that you can make or lose $500 if the position you took moves by 1%. Considering your total investment, you have the opportunity to gain or lose half of your capital. And while the movement is pretty small, the leverage makes the end results quite massive. If the market is volatile and prone to wild swings, you could make losses that surpass the amount you have invested. As such, this means you are faced with greater risks if you can’t manage the underlying risks.

Big Data and Predictive Analytics Have Changed Forex

Forex is a complicated way to make a living. The good news is that big data and predictive analytics have helped traders gain an edge. It will change the role of foreign currency trading for years to come.