Research on cognitive bias in FX
It has been known that reasons for suppressed profits of FX trading lie in human cognition, rather than in trading techniques. This is called “cognitive bias”, which means wrong awareness of situations / environments people are in, leading to irrational decisions in trading. There are three factors of cognitive biases in behavioral finance: 1] Prospect theory: tendency to prioritize avoidance of losses (rather than gaining profits) 2] Anchoring: tendency to make investment decisions based only on information given initially 3] Concorde effect: tendency not to stop loss lingering on investments made so far knowing this might lead to further loss His researches show that strictly abiding by set trading rules will enable avoidance of risk / loss (80% at maximum), where an automatic ordering method of IFO is thought ideal. IFO, by definition, is a method combining IFD and OCO, available only in new orders like IFD, to be made for both stop and limit orders at the same time for such settlements. Related data in the research have indicated that sticking with this rule will be effective in maximizing profits (minimizing losses) in FX.
Research on automatic trading, tapping AI
We are studying whether automatic trading through AI with three pillars of currency pairing, technical indicators and economic news can bring better results than human trading (evaluating certain transactions to know whether it will automatically learn “ideal trading”). The more AI learns, the further overall profit has increased for the broad index (as of January 2023, with 108.5pips), as such experiments with AI show. In the recent three months, the operational (trading) results have gradually gone up, minimizing investment risk, a factor deemed very important in FX. This suggests the possibility of AI is immense toward the future.