Big data is changing the future of financial markets in fascinating ways. Most experts discuss the impact it has had on the stock market, but it is changing forex in even bigger ways. This is most evident when looking at the role that big data plays in social media, which is influencing forex in unexpected ways.
Big Data and Social Media Are Both Changing the Rules of Forex
Social media has played a massive role in many industries. Big data is making it more versatile, especially with marketing in the financial industry. The Forex Market trades trillions of dollars. It is the biggest market in the world. It is not as popular as the markets trading commodities and financial instruments. This is ironic given the potential for people to make a lot of money in it but there is an explanation. As forex becomes more popular, it becomes more dependent on big data. Big data scientist Zak Goldberg says it is the future of the forex industry:
“Big data is the future of many forms of technology, including the world of forex. Big data could change the way we trade, the way we make decisions and the way that we reinvest our earnings. In short, it could change our entire way of trading. In this post, we look at why big data is the future of forex trading.”
Zak’s focus has been primarily on the role of big data in trading. But is equally important in understanding customers and marketing, which social media plays a role in. Until recently, the Forex market was a mysterious entity that had massive barriers to entry. Therefore, to the average person, it was shrouded in mystery. However, with the advent of social media, the foreign exchange market has opened up and this development can be attributed to among other things, social media. What relation does social media have with the forex market? There is a general consensus that the foreign exchange industry is not utilizing social media fully. The benefits which the forex accrues from social media include:
- Connectivity amongst the traders
- Faster Communication of news and trends
- Better and more informed decision making
Social media gives forex platforms access to a treasure trove of data that helps with all of these things. This helps data savvy forex marketers make better decisions.
Traders are Better Informed
Of the mainstream social media platforms (those open to the general public), LinkedIn and Twitter are perfect for this industry. LinkedIn is the best because brokers and traders can form groups and discuss Forex matters. They can post trends, observations, and predictions to an audience that cares about these subjects.
Spreading News and Information faster
A hacker once breached Associated Press’ Twitter account and tweeted that White House had just had an explosion. The impact on the market was massive. It plummeted drastically and although it recovered soon after the news was confirmed as fake, it showed just how powerful social media is. Considering how volatile the forex markets are, traders can now check on their newsfeeds to provide them with the information they can use to make decisions. They should only ensure that the news is from credible sources before they act.
Social Trading
When we hear the word “social media” the words Facebook, Twitter, LinkedIn, Instagram, and names of other social platforms immediately pop up in our minds. Unknown to the average person, however, is the fact that there are actually other social networking tools for Forex traders. These social networks are usually established when a Forex broker partners with a provider or develops their own network. Some of these networks include:
- FX Copy by Vantage FX
- FXStat Tradebook by FXOpen
- IBFXConnect by Interbank FX
- Open Book by eToro
The social networks developed by the brokers are perfect examples of social media’s interaction with forex trading. Unlike mainstream social platforms, these forums are custom-built for the traders. Therefore, they have features that enable traders to share their profile, post their trades on an ongoing basis, and interact with their fellow merchants on matters to do with the forex market. This concept is referred to as “social trading.” It is catching on as more brokers realize the benefits of fostering communities among clients. The only danger they have to be up against is the rise of fake accounts run by non-human entities (bots). One way in which social trading is proving a hit is by the way they allow traders to analyze their own trades, compare it with others, and even copy what other traders are doing. Newbies or traders who don’t have the time to analyze the markets for themselves can simply follow what successful traders are doing. Open Book by eToro allows users to choose the traders they want to copy as well as the amount of money they want to invest. In summary, the benefits of Social Trading are:
- Makes entry of new traders more seamless: They can rely on what other traders are doing and copy them.
- Alerts traders of events and news in the Forex market: Some platforms develop calendars and run active news segments geared towards informing their clients.
- Allows traders to share ideas and insights
- Builds an ecosystem that enables brokers to analyze the market better.
Final Thoughts: Social Media and Big Data Are Gamechangers for Forex
Social media is a powerful tool in business. Although it is making inroads in the forex markets, there is room for improvement. The benefits outweigh the demerits of relying on social networks for information. The concept of social trading is also catching on. Both mainstream social media and the less orthodox but important social platforms can be used by traders. They can now make better decisions and interact with their peers in a manner that was unheard of in the past.