How big data will help forex brokers in the long run

Published August 17, 2017   |   

Foreign exchange (Forex) trading has evolved rapidly over the past three decades. The internet made it not only accessible to new traders, but helped those traders succeed. There are just so many tools available out there for analysis and execution strategies. And, of course, big data has played a part in that.

Big data helps traders analyse the markets and predict market activity. Using machine learning and algorithmic trading techniques, traders are set up for success in a market with infinite patterns to exploit.

But big data is not only useful to traders. Brokers are increasingly using big data to predict what their customers are going to do. This TradeTime Brokerage Review shows how today’s brokers can therefore help their customers succeed, while improving their bottom line as well.

Forex and big data: nothing new

Simply by moving to electronic platforms, the Forex market became one of the first big data generators of human behavior. What was once seen as chaotic and unpredictable could suddenly be charted and assessed in the cool light of day. Traders’ decisions could be analysed and compared to one another. Their profits and losses and reactions to those profits and losses were no longer hidden.

Predictive analytics

Big data alone is not responsible for the way modern technology has shaped the financial markets. Predictive analytics is the major force in driving the way people trade using big data. Predictive analytics takes that known data and uses algorithms to predict new data. Traders once relied on intuition and hard manual work, but can now more accurately predict the markets by simply letting a computer do the work for them. They can focus on much more micro factors, allowing them to craft strategies based on tons of data that no one person could compute alone.

Scalping for brokers

But how do brokers benefit from big data and predictive analytics? One way is to use scalping. Brokers are the middleman, not investors, but can use their position to invest securely and make big profits from small trades.
Scalping refers to opening trades and holding them for a brief period before closing them for a small profit. Since they are in the position to do this with countless trades, those profits add up fast. It is big data and predictive analytics that has made this possible.

Takes out the guesswork

The “life” of a Forex broker is a lot less risky these days. While big data and predictive analytics is not a foolproof way of profiting off the markets, it does remove a lot of the guesswork. Big data provides such a huge database that everything that’s happened before can be used to predict what will happen again. With access to so much information, there is no longer as big a risk of panic causing huge crises. After all, cold hard facts can often be brought to prevail over emotion.
Of course, that’s not always true, and human error will always play a part in Forex trading. However, brokers are still in a better position than ever to profit in the ever-changing – and yet predictable – Forex market.