Forex: Where we are and Where We’re Heading
2018 has been a big year for the forex market, but there’s a whole lot more to come in 2019
We’re only three quarters of the way through 2018, but already it has been a year of enormous change. New regulations, increased use of technology and a flood of new people into the market have already had an enormous impact on the sector. But already the signs are that 2019 is likely to bring even more upheaval.
A year of regulation
One of the biggest concerns for the financial sector this year has been the arrival of new regulations. The year began with the implementation of MiFiDII which requires all companies to keep a complete record of communications with clients be that over the phone or by email. PRIIPS, meanwhile, requires companies to do more to ensure retail customers had a full understanding of the products they were trading.
Perhaps the biggest and most high profile, though, was GDPR which has had an impact on just about every kind of business. GDPR introduces a host of new measures which govern how organisations use customer data, our rights over the data companies hold on us, and what data can be transferred between different countries.
For example, data cannot be transferred from the EU to another country unless it meets certain standards of security. This will be a big question during the Brexit negotiations as the Government seeks to ensure the UK will still be able to move data in and out of the EU.
For forex traders this is significant, because it often involves storing large quantities of sensitive data on platforms – often with little awareness about where they are based or how secure their processes are. Becoming and remaining GDPR compliant will be a major undertaking.
2018 has also been a year of political and economic uncertainties, with the ongoing saga of Brexit, questions about the fortunes of the oil price, possible trade wars between Donald Trump and just about everybody.
One offshoot of this has been to make forex more attractive. Volatility between the currencies is increasing and while that does increase risk it also creates the opportunity for greater gains. Every announcement from Trump, every new piece of news about Brexit or fresh turmoil in the Eurozone sparks big shifts in the market and if you think you know what those announcements are likely to be you stand to do well.
Technology is in the process of revolutionising the financial sector. This year, much of the talk has been about artificial intelligence and big data. Forecasts by IDC suggest the amount of data we use could grow ten-fold by 2025. The artificial intelligent market, meanwhile, is surging. A study from Statistica shows the AI market growing by around 150% between 2016 and up to 2025.
Investment firms are embracing automation and AI to improve every aspect of their business from the back-office administration to trading performance and much more, but it’s the ways in which technology is opening up finance to the public where the real changes are happening. The last few years have witnessed a surge in the number of online trading platforms. These make it easy to open an account and trade all sorts of financial instruments through either your desktop, tablet or smartphone. By embracing smart technology, they are also making it easier for people to trade effectively even if they have no experience. Companies such as ROFX use sophisticated AI technology to deliver an automated trading robot.
The technology has been refined over a number of years to the point where it is offers positive dynamics – namely that the number of positive trades should always exceed the number of negatives. This makes trading decisions on your behalf, and although success can never be guaranteed, its developers are convinced it can deliver reliable income streams over a period of time.
2019 and beyond
Moving into the future, the technology has even more potential. We have only scratched the surface of what AI can achieve. The financial sector is continually learning to capture and harness increasing levels of data. Systems are becoming more advance and the rate of development is accelerating.
Regulation will continue to evolve to keep pace with the changing nature of the financial landscape. New technologies deliver fresh capabilities which also create new risks and challenges. Regulations will have an impact on financial companies and their customers, but they have a track record of being able to adapt and continue to thrive. The future, in other words, is looking very bright indeed.