FX’s OTC nature will limit machine learning

A machine’s capacity to analyze market data in a quantity and speed that no human trader could hope to match is undeniable.

However, that machine also has to deal with data characteristics that are constantly moving, autocorrelation – where today’s price depends heavily on yesterday’s price – and low signal to noise ratios, which require it to sift through large volumes of meaningless data to find a meaningful result.

The over-the-counter (OTC) nature of the FX market also means that data might only be applicable to specific brokers, says Kris Longmore, co-founder and head of quantitative research at Quantify Partners.