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Why Forex Traders Prioritize Alternative Data

By: Banking CIO Outlook | Thursday, August 13, 2020

The alternative data’s abilities to continually refine real-time market information help the forex traders to upgrade their decision-making skills. 

FREMONT, CA: Over the past few years, continuous data generation is transforming the operational infrastructures of various industries. Traditional data sources and methods may not achieve the current market demands. The capital market is not new to the above trend, either. The sector uses alternative data to understanding the present as well as upcoming market trends. Today, the alternative data is used for the enhancement of forex trading.

Every investment decision help to leverage data-driven insights. Alternative data contributes a significant edge to the investment firms while influencing the various trading aspects. One such aspect is forex trading, where in-depth data is the key. However, such data are difficult to collect. Even the government data often fails to draw the bigger picture. Technologies address the above challenge with artificial intelligence (AI), facilitating a constant, refined, and real-time source of information to financial securities.

Initially, alternative data was introduced to contribute to the hedge funds, which is popularly used for the entire capital markets. Social media, message boards, and other public information sources have also become necessary to forex traders. Apart from social media, credit card transaction activities, banking details, and satellite imagery also influence trading signals helping the forex traders to make better and sharper initiatives. Alternative data improves the situational awareness of the traders and assists them in developing strategies based on valuable insights. Additional layers of information obtained from alternative data allow the forex traders to either verify or modify their strategies in real-time.

Moreover, there are various indirect factors, spanning diverse sectors that can impact the forex market. For instance, the political landscape of a country presents a vital role in the economic outlook for that country, too, and consequently determines the perceived value of its currency. Another key influence is the balance of trade levels and trends among various countries. For example, a nation with high-demands for goods and services see an appreciation of its currency. Alternative data can include the above aspects and give valuable trading insights to the forex traders.

Alternative data influences the process forex traders are involved in trading and significantly affects their decision-making skills.

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