Just the other day I had a request from an individual who wanted me to place a link or ad for a trading robot on my website. I was not interested and I will tell you why.
Forex Market: Robots against humans
Who is forcing the market to move in a certain direction? People or computers (bots)?
The foreign exchange market moves billions of dollars in foreign currency every day. There are millions of traders with accounts ranging from a few dollars to hundreds of millions each, some of which allow a trading robot to trade for them.
Although I couldn’t find reliable statistics on the internet about what percentage of traders use trading robots to make decisions for them, I would estimate that it’s probably less than 50%. The remaining 50% of forex traders use some type of trading software to help them make decisions, but the final decision is made by them (the people) and not the machine.
Artificial intelligence or AI has made rapid improvements in the last 10 years, and progress is coming fast. The most advanced AI systems can teach at the level of a small child and adapt to changing environments. These types of systems are designed to trade at all levels and have moderate success.
When the scale gives advice
As neural networks and algorithms become more sophisticated, I believe more and more people will choose to use trading robots to think for them. But I believe that in order for robots to have a significant impact on the Forex market, smart robots must execute more than 50% of the total amount of currency without human intervention. At this point (2014), I don’t believe robots dominate the foreign exchange market, but they are being used more and more. A recent article I read in one of the major news outlets stated that the use of automated trading systems by large banks is around 65%. The reason for this is the reduction of illegal activities of trade insider groups that manipulate prices. If this is true, we have a situation where prices can fluctuate dramatically, with little or no reason, and human emotions are not such an important factor. Conversely, if we know that most algorithms are used by large banks, then we can better predict price movements.
If there is a higher percentage of the world currency traded by robots, then there may be more reliable means of trading using robotic systems. It is interesting to note that all of these computer algorithms or EAs (expert advisors) used by the banking system are programmed using professional human trafficking patterns. The main difference between a trafficker and a computer program is that it cannot be reprogrammed to adapt to changing market conditions. Existing supercomputers and the most sophisticated neural networks cannot feel it. Biological systems show emotions and the machine crashes badly. Non-biological computers cannot feel the ecstasy of profitable trade, nor feel the excruciating pain of margin. They cannot feel fear or feel a rush of greed, and therefore their actions do not take these emotions into account; nor can I predict these emotional responses with 100% accuracy. Although a higher percentage of trading takes place using these forex robots, professional traders still have control and often go out or trade manually if they see the forex system doing something they don’t want to do.
That’s why I don’t use forex robots or software or algorithms that help me trade. Instead, I take a biological, artistic, illogical evaluative approach to trading based on looking at analytics of data, feelings, and other factors, putting them into my biological brain to educated assumption.