Exploring the role of technology in Philippine forex trading
Technology has an immense impact on the Philippine forex market, and it is remodeling how the trading world works. Technological advancement has led to a rise in the number of forex brokers, making it more and more possible for traders to participate in the forex market from the comfort of their homes and even on the go using a smartphone device.
Accessing the forex market has become easier than ever before, where traders only need a stable internet connection. However, with technological advancement, nefarious activities have also increased as fraudsters and hackers use to access programs to get into forex traders’ systems or accounts to steal their credentials and funds.
In this article, we will explore the role of technology, such as automated trading systems, mobile trading platforms, high-frequency trading, AI, and ML, in the Philippine forex market.
Automated Trading Systems
Automated trading systems, also known as algorithmic trading, allow traders to build certain rules for entering and exiting trades that can be executed automatically with the help of a computer. Automated trading software takes into account every aspect, from advanced mathematical or statistical calculations to technical analysis. Traders can make precise money management rules and enter or exit trades with the help of automated systems that allow specially designed software to monitor and execute trades at the right time and price.
Automated trading systems that monitor the forex market and execute trades profitably have many advantages. One of the main benefits of using automated trading systems is the lack of human emotions governing forex trades. Removing emotions helps traders make rational decisions and remain true to their trading strategies created by the algorithmic trading system. Automation also helps improve the speed of trades since the software responds instantly to economic indicators, satisfying the algorithms and allowing faster transactions, placing trades in the shortest amount of time with maximum precision.
Lastly, automated systems allow users to trade various strategies on multiple accounts at a single time. This potentially spreads the risks over many instruments while creating hedges against losing trade positions. The software can also scan for the best market trading opportunities, monitor trades, and generate orders.
However, there are two sides to every coin. Using automated systems has its own set of drawbacks as they are not completely hands-off. Some amount of oversight is required to ensure that the automated processes are running efficiently and correctly without any unexpected failures. There is also the problem of over-optimization which refers to extreme curve fitting, producing unreliable trading plans.
Philippines traders must review the popular automated trading systems available in the country before choosing a brokerage platform to start investing with. The best forex broker in the Philippines must be chosen for forex trading based on factors like regulation, range of assets supported, fees, tools and analysis, minimum deposit requirements, mobile compatibility, payment methods, and customer support.
Mobile Trading Platforms
When it comes to forex trading, it is always recommended to choose regulated forex brokers that offer a perfectly optimized mobile app, giving more freedom and flexibility to traders while trading on the go. The growing popularity of mobile trading platforms in the Philippines cannot be ignored, with the increasing number of brokers offering mobile apps such as –
- FXTM – With the new FXTM mobile app, traders can get access to live currency rates and manage their accounts on the go. 70% of the FXTM traders use the mobile app that offers flexibility, speed, and hundreds of instruments. Mobile trading with FXTM can be done on MetaTrader 4 & 5 platforms, available on iPhone and Android operating systems.
- OctaFX – OctaFX trading app allows users to create, track, and manage trading accounts on the go, available on Google Play Store or App Store. It allows traders to easily deposit and withdraw money, manage OctaFX profiles, and control demo, contest, and real accounts with utmost comfort. The lightning-fast mobile app offers easy-to-use and attractive designs to enhance the trading performance of the users.
- XTB – XTB users can get access to the global financial markets by exploring the new xStation mobile app. It supports more than 2100 CFD markets, including forex, indices, cryptocurrencies, commodities, ETFs, and stocks. It is simple and highly intuitive, with advanced built-in trading calculators and charts that allow users to manage their risks before placing trades by setting up take profit and stop loss levels comfortably and quickly.
- Easy to use – Mobile apps can place trades effortlessly.
- Market updates and live portfolio monitoring – Market data, including stock, indices, commodities, and shares, can be viewed on the go anytime, anywhere.
- Notification – Mobile trading apps provide notifications, sending users alerts about the latest news and events.
- Analysis and charts – Mobile trading apps also feature historical analysis and charts that allow users to view previous data and prices and use analytical tools.
- Limited access – Many mobile trading platforms have restricted access to the forex market, presenting hurdles like the limited availability of currencies and derivatives products.
- Small screen display – Small screen sizes can be inconvenient for many users, limiting the amount of information presented at a time.
- Connectivity – Mobile connectivity may not be uniform in remote areas where disturbances are common, leading to losses during trade placements.
- Slow Speed – Low-budget devices generally have poor processing speed, leading to network and technical issues causing disruptions and delays while placing trades
High-frequency trading (HFT) uses powerful computer algorithms and programs while place large trade orders in a few seconds. HFT uses complex programs and codes to analyze financial markets and execute trade orders depending on the market conditions. It has become extremely popular in the Philippine forex market as more and more foreign exchanges started to provide various incentives that added liquidity to the forex market.
The key advantages of using high-frequency trading include improving market liquidity and removing bid-ask spreads that would previously be too small for the traders. However, the use of HFT is quite controversial and has faced harsh criticism.
Using mathematical algorithms and models to take human interaction and decision out of the equation has replaced many broker-dealers in the Philippines. Another major criticism of using HFT is that it generates “ghost liquidity,” which is not real since the assets are held only for a brief moment.
Artificial Intelligence and Machine Learning
Artificial intelligence and machine learning are broad technological terms covering a variety of small innovations while underpinning a global marketplace with a growth of 20.1% CAGR. The application of AI and machine learning has improved forex trading in terms of analysis, data utilization, and collation. This, in turn, has contributed to more accurate predictive tools such as SVM and neural networks in forex trading.
Benefits and Risks of Using Ai and Machine Learning in the Philippine Forex Market
AI helps track real-time market data and automate repetitive trading processes, playing a major role in the Philippine forex market. Successful forex traders highly depend on artificial intelligence to minimize the risk factor. By using trade bots and other AI programs, forex trades are automated, which are usually complex processes that require valuable time for the traders. By depending on algorithmic forex trading, investors can stay ahead of the competition and be more successful than those without AI. AI and ML have resulted in greater transparency while monitoring prices in real-time. It also helps traders make the right forex decision with the help of predicted uptrends or downtrends of a currency.
Alongside the advantages of using AI and machine learning tools while trading foreign currencies, there are several problems as well. Machine learning-driven algorithms can be less predictable and adjustable, creating market volatility and adding more risk to forex trading. Moreover, the heavy complexities of algorithmic trades can strain the ability of users and developers to fully understand market instances while trading foreign currencies.
Examples of AI and Machine Learning
Some examples of AI and Machine Learning include SVM and neural networks. In forex trading, SVM or Support Vector Machine is used to assess or anticipate if a market trend is bearish or bullish. Neural Network is a machine learning tool used in forex trading to analyze market data (technically or fundamentally) and to anticipate target variables like trading results and open and closing prices.
The modern era has revolutionized the forex industry in the Philippines, with the proliferation of electronic devices and the internet having a definite impact on the forex market. Technology has transformed the currency market and has made the process of trading forex substantially more efficient. Financial corporations and institutions in the Philippines do not have to hold a monopoly over the market.
People of all levels can engage in the forex market with the right tools and knowledge and stay up to date with current news and economic events. Modern technologies like automated trading systems, mobile trading, high-frequency trading, AI, and machine learning, have allowed traders easy access to information, keeping them up-to-date with the latest market trends and data influencing forex trading.