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Alternative Market Briefing

Other Voices: Artificial intelligence: surviving the next black swan event through next generation algorithmic trading

Tuesday, July 26, 2016

By Michael S. Young, Chief Operating Officer and Co-Founder Mediatrix Capital

Sophisticated artificial intelligence (AI) is enhancing the Forex investment approach with next generation algorithmic systems that are able to perform human tasks such as visual perception and multi-input decision-making. These systems are designed to be smarter than humans in many ways and are definitely faster by far. Humans, however, still need to create the rules and programs that make AI-based programs tick and deep industry experience is needed to support superior AI development and execution. Thus, humans and artificial intelligence are a marriage made in Forex heaven.

The basic premise of Forex trading is that the trader (or system) decides to enter a currency pair trade with a full understanding of market conditions and then react properly to exit the trade at the optimal time with a profit. If the market moves unexpectedly against the initial trade position and a counter trade of the same pair or a correlated pair needs to occur to initiate an immediate zone recovery action, a proper system suite can react fast enough and is sophisticated enough, to trade the same currency pair instantly in the opposite direction based on a set probability, and/or elect to trade correlated pairs for zone recovery and/or profit taking. However, when market direction probability calculations yield the expected results in the market, trading is rather bland as the markets in fact move as expected y......................

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