Over the years, the dynamics in the forex markets have changed. Technology has slowly but surely made its way into all realms of the market. People now are rewarded based on performance rather than the position they occupy.
Stakeholders in the forex trading business have to work harder and technology has played a factor in this change. Forex markets are nowadays online at all times and trading never stops. Since portfolio managers are responsible for their clients’ forex deposits (French traders call it “forex montant minimum”), they have to be quick and witty to stay at pace with the fast-moving markets. While technology has given them a flexible space to execute as they please, they cannot ignore the data that influences markets. This is why a lot of care is necessary to avoid failure.
As opposed to humans, machines never make mistakes. They are thus effective in the forex trading business. There are cases where some people have an edge over machines due to their intuition, but this is the exception rather than the norm. The key advantage that technology has over humans is, undoubtedly, the vitality to perform tasks faster and without exhaustion. The speed, accuracy and processing power ensures that they are far much better at processing information and delivering results.
Despite that, machines still have a weakness since they rely on unverified information coming straight from the markets. Such information can sometimes be misleading and if this is the case, chances of making losses are huge. Gathering information from the markets has a limitation. It is an expensive and slow affair. A modern portfolio manager is faced with a situation where they have to decide whether to buy information or gather it themselves. Whether a trader decides to pay for this information or whey they commit their time to learn, the end result is that resources will have to be spent.
Machines like bots are aggressive in processing incoming information and this affects the volatility of the market. Portfolio managers thus face a dilemma of whether they should apply the technology and affect their liquidity or whether they should just speculate. The technologies available are also constantly evolving and improving every day. Portfolio managers must use the high-frequency trading technology sparingly so as to avoid failure. Technology is ultimately great for exposing them to current market dynamics. The same technology is however also often faulty, so the need to apply intuitiveness is never out of the question.
All in all, technology affects the trading business in both positive and negative ways. The ultimate decisions made by stakeholders in the market are more about proper timing than they are about whether technology is used or not. Market information coming in huge volumes can only be processed by machines that are capable of running complex algorithm quickly. The decision of when to execute a plan, however, lies squarely in the human realm. Portfolio managers thus have a task of weighing the risks and applying the right action when necessary. Many companies have ventured into processing forex market data through high-frequency trading technology. It is up to managers to know whether to utilize services of such companies or to formulate their own solutions.