Neural networks in Forex trading

Neural networks in Forex trading

Neural networks in Forex trading

In this article, we will talk about neural networks in trading, their pros and cons, and also touch on the topic of their application in the Forex market.

Not so long ago, Forex experts started using neural networks. They can be considered the latest innovation that was made by trading participants.

In General, the term neural networks was borrowed from the field of artificial intelligence. From a technical point of view, this concept means imitating the mechanisms of the human brain. The main feature is that neural networks in trading have the skill of learning based on what has already been done.
The essence of neural networks

The use of neural networks in the Forex market makes it possible to extract one result from several data streams.

Before you carry out the application of neural networks in trading, you first need to be trained to detect and correct patterns. Note that the training process, as well as testing, is quite a capacious process. But in the future, this network will be able to effectively predict the trend, based on the acquired skills. In other words, the network will constantly compare new data with existing data in its database. A forecast will be made based on the results of this comparison.

As training, Forex neural networks use two types of data in analysis: for training and testing.
Advantages of neural networks

A significant advantage of neural networks is the fact that they are trained on an ongoing basis due to new data and existing forecasts.

Note that neural networks can combine technical and fundamental data in addition to everything else, which allows them to be optimally applied.

Thus, Forex neural networks have certain skills that allow them to identify unrecorded Price Action patterns in the market and apply them in the compilation of forecast data, achieving the most accurate result.
Disadvantages of neural networks

application of neural networks in trading

At the output, neural networks can provide the same information that they receive at the input. The disadvantage also lies in the use of intelligence without human emotions. After all, the market may experience high volatility for certain currency pairs, which is caused by a sudden emotional factor.

By the way, nowadays there are many automated trading robots that use Forex neural networks in their work. However, they should not be considered the Grail that everyone is looking for and can't find. There is a basic rule without which the use of neural networks in trading will not be effective. You need to constantly train the system, test it, and perform proper optimization of the expert Advisor. This is the only way to achieve success.
Neural networks don't work?

There is a certain category of Forex traders who are convinced that neural networks simply do not work.

Neural networks have long been successfully used in all areas of human activity. It is also used for forecasting.

What prevents you from making an accurate forecast for stocks and currencies, if the judgment is correct, that history repeats itself. Thus, it is necessary to show the neural network historical data, and it will be able to predict the movement of assets, based on data from history.

However, in practice, the neural network predicts with an accuracy of no more than 50-60%. In other words, it's like guessing numbers from one to two.

That is, as soon as a pattern is found in the market, its development may be the same as it was before, or it may work out in a completely different way. Neural networks in trading can be attributed to technical analysis methods without exaggeration, since they look for patterns over a certain time period, based on historical data.

Today, you can find special platforms on the Forex market that are based on Forex neural networks and technology that allows you to train it on a specific trading system in order to further predict the movement of assets in the market. As for the relevance of using such intelligent assistants, you need to use them. However, as in the case of trading advisors, you need to monitor their activities everywhere. After all, a machine is not a person and it still does not know how to think.

Note that for beginners in trading, it does not make sense to get into the neural networks of Forex. The main thing is to learn how to trade profitably, and after a certain result, try to create a neural network.

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