Algorithmic Trading in Forex Markets: The Impact of AI-Driven Strategies on Liquidity and Market Efficiency
DOI:
https://doi.org/10.32628/CSEIT251112222Keywords:
Algorithmic Trading, Artificial Intelligence, Financial Markets, Machine Learning, Risk ManagementAbstract
This comprehensive article examines the transformative impact of artificial intelligence and machine learning technologies on the foreign exchange market. The article explores how AI-driven systems have revolutionized trading strategies, order execution mechanisms, and liquidity provision in forex markets. The article encompasses the evolution of market microstructure, the emergence of non-bank liquidity providers, and the challenges posed by market fragmentation. The article explores the application of advanced technologies including deep neural networks, natural language processing, and reinforcement learning in forex trading, while also addressing the regulatory considerations and risk management protocols that have evolved alongside these technological advancements. Furthermore, the article evaluates the implications of these developments for market efficiency, price discovery, and systemic stability, providing insights into the future trajectory of forex markets as quantum computing and advanced AI integration continue to reshape the trading landscape.
Downloads
References
Bank for International Settlements, "Triennial Central Bank Survey, OTC foreign exchange turnover in April 2022," Triennial Central Bank Survey, Annex Tables, Dec. 2022. [Online]. Available: https://www.bis.org/statistics/rpfx22_fx_annex.pdf
Wilhelmina Addy, et al., "Algorithmic Trading and AI: A Review of Strategies and Market Impact," World Journal of Advanced Engineering Technology and Sciences, 2024. [Online]. Available: https://www.researchgate.net/publication/378548435_Algorithmic_Trading_and_AI_A_Review_of_Strategies_and_Market_Impact
Phuong Dong Nguyen, et al., "Deep learning-based predictive models for forex market trends: Practical implementation and performance evaluation," Science Progress, 2024. [Online]. Available: https://www.researchgate.net/publication/383296601_Deep_learning-based_predictive_models_for_forex_market_trends_Practical_implementation_and_performance_evaluation
Kirill Mansurov et al., "Impact of self-learning based high-frequency traders on the stock market," Expert Systems with Applications, Volume 232, 1 December 2023, 120567. [Online]. Available: https://www.sciencedirect.com/science/article/abs/pii/S0957417423010692
Sophia Nicole Ansari, et al., "Behavioural Finance with AI to Model Financial Market Microstructure Dynamics," SSRN Electronic Journal, 2024. [Online]. Available: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5048581
Fahad Masood, "Impact of Artificial Intelligence on Financial Markets," International Journal of Emerging Multidiciplinaries Social Science 3(1):8, 2024. [Online]. Available: https://www.researchgate.net/publication/385777762_Impact_of_Artificial_Intelligence_on_Financial_Markets
Andreas Schrimpf, et al., "FX trade execution: complex and highly fragmented," BIS Quarterly Review, December 2019. [Online]. Available: https://www.bis.org/publ/qtrpdf/r_qt1912g.pdf
World Economic Forum, "Navigating Global Financial System Fragmentation," Global Financial Markets Report 2025, 2023. [Online]. Available: https://reports.weforum.org/docs/WEF_Navigating_Global_Financial_System_Fragmentation_2025.pdf
Miguel Sarmiento, et al., "The transmission of non-banking liquidity shocks to the banking sector," Latin American Journal of Central Banking, 24 June 2024, 100139. [Online]. Available: https://www.sciencedirect.com/science/article/pii/S2666143824000218
Isao Yagi, et al., "Analysis of the Impact of High-Frequency Trading on Artificial Market Liquidity," IEEE Transactions On Computational Social Systems, Vol. 7, No. 6, December 2020. [Online]. Available: https://ieeexplore.ieee.org/stamp/stamp.jsp?arnumber=9187563
Thomas Ankenbrand, et al., "Quantum Computing and Artificial Intelligence in Finance," Institute of Financial Services Zug IFZ, 2023. [Online]. Available: https://www.researchgate.net/publication/376375411_Quantum_Computing_and_Artificial_Intelligence_in_Finance
Jaya Chandra Srikanth Gummadi, et al., "Robotics and Algorithmic Trading: A New Era in Stock Market Trend Analysis," Global Disclosure of Economics and Business 10(2):129-140, 2021. [Online]. Available: https://www.researchgate.net/profile/Narasimha-Boinapalli/publication/385554182_Robotics_and_Algorithmic_Trading_A_New_Era_in_Stock_Market_Trend_Analysis
Downloads
Published
Issue
Section
License
Copyright (c) 2025 International Journal of Scientific Research in Computer Science, Engineering and Information Technology
This work is licensed under a Creative Commons Attribution 4.0 International License.