As the novel coronavirus continues to devastate communities around the world, we are beginning to see an equally serious and equally devastating impact – that of the economic fallout sure to follow this once-in-a-lifetime health crisis. The disruption to international trade and commerce is not unprecedented, though at this stage there is no knowing how things will end up. The economic uncertainty that follows the COVID-19 outbreak will likely cost the global economy $1 trillion in 2020, the United Nation’s trade and development agency, UNCTAD, said earlier this week, and most economists and analysts are in agreement that a global recession is becoming unavoidable. Forex currency pairs are experiencing swift re-evaluations, equities are struggling, and market volatility is just about all we can depend on right now.
At a time like this, people are wondering whether Big Data‘ – one of the hottest tech concepts to have been born this decade – will actually be able to provide any certainty to brokers and investors with respect to how to behave in increasingly volatile foreign exchange markets. Forex trading has always been associated with inherent risks and rewards, which is why it pays up big when a win does eventually come around. Often though, the risks are too much for traders.
Enter Big Data and algorithmic trading.
The additional information gleaned from crunching Big Data using software and other digital tools can help brokers and traders analyse markets and identify patterns, so as to improve their overall trading strategy. The idea is that by incorporating machine learning and algorithmic trading techniques and forex trading course, the guesswork is taken out of foreign exchange market trading, making a gamble more likely to succeed, statistically-speaking. While algorithm-based trading hasn’t exactly been lauded as a foolproof means of making a buck (because, well, nothing is), it can certainly be leveraged as an additional tool for brokers to help them make more informed decisions for their clients.
By accurately predicting the fluctuations of the market, and eliminating the arduous, painstaking work of researching historical market trends, Big Data can allow traders to focus more on big-picture decisions, rather than sweat the small stuff. Big data-powered bots can process in a number of seconds what would take brokers weeks if not months to analyse, giving them comprehensive market analysis in a number of minutes.
In the time of coronavirus, though, where the markets are incredibly volatile, what does big data mean for forex trading?
What many wouldn’t fully appreciate is that big data isn’t only useful for predicting long-term market outlook – it can also be helpful for crisis prevention. Whenever there is a crisis in the market, any trader in the market at that time stands a chance to lose their investment. Big Data analytics, however, can help brokers predict those crises in advance so that they can inform and advise traders accordingly.
Now, perhaps we are already past this point, but we have no real idea as to how long this fallout will last, so Big Data still stands a chance to save countless traders on extremely dangerous trades over the coming months.
At the same time no one could have predicted the coronavirus – not even the directors of Contagion. This week, the benchmark S&P 500 and tech-heavy Nasdaq dropped by 1.6 and 1 percent respectively, while the Dow Jones index closed at 1.8 percent lower at 21,917 as the coronavirus crisis brought business activity in the US to a standstill overnight. Historical data and deep analysis of that data could certainly not have predicted all this back in October.
However Benjamin Bilski, founder and CEO of the publicly listed FinTech NAGA Group AG, a large forex and CFD broker, says that Big Data can provide a level of certainty that banks and finance experts cannot right now.
It’s the biggest single session fall since the big crash in 1987, and there seems to be little that central banks can do to reassure people that they don’t need to panic, he said. Big Data we can trust. You can’t argue with figures, and Big Data is just that – figures that, when analysed in a certain way, uncover hidden patterns, correlations and other insights that can help traders operate more efficiently.
Information about NAGA shows that the trader platform offers a selection of more than 750 different trading instruments to choose from, including more than 45 forex pairs, a full range of popular cryptocurrency pairs, and hundreds of CFDs based on the stocks of major companies, as well as a selection of exchange traded fund (ETF) and commodity CFDs. The German fintech company aims to create world-class mobile and web applications for the capital markets and gaming sectors, along with blockchain-based solutions that depend largely on Big Data.
Many believe that markets will respond to this crisis the same way they have to every other crisis; despite dropping heavily at first, they will not only recover but will thrive before we are all back on our feet again. One study that looked at 28 global crises over the past hundred years from World War 2 to 9/11 showed that during each calamity markets overreacted and fell far, only to recover shortly thereafter. It found that investors who panicked and sold their shares found themselves having to replenish their portfolios at much higher prices in the aftermath, while patient investors were heavily rewarded. After Pearl Harbor, for example, the S&P 500 index dropped around 18 percent over the months following, but after 1945 the stock market returned more than 25 percent a year, on average. Profiting by investing during a crisis requires discipline, patience, and a cool head, but backed by Big Data and other algorithm-based trading tools, even the most technologically unsavvy trader or broker can come out of a crisis like this on top, financially-speaking.
Coronavirus, like all other geopolitical events, should reveal similar trends, and by taking heed of this smart investors will realise that now is in fact the time to purchase stocks and other assets.
