Currency Forecast: How to Trade Currency Using Algorithms

Currency Forecast: Algorithmic Forecast Performance Analysis from July 25th – October 25th

Stock and currency analysts and investors are quickly being substituted by powerful computerized algorithms. Unlike traditional algorithms, todays advancements utilize advanced self-learning algorithms to analyze, model and predict markets. Unlike analysts who look mainly at the specific company’s performance they are analyzing, the algorithm supervises the movement of money in all markets. This allows it to forecast not only stocks, but also ETF’s, world indices, gold, currencies, interest rates, and commodities. It holds a significant advantage over analysts in many ways, such as:

  • Algorithms can continuously look at the money movement between markets; they require no sleep and no rest.
  • Algorithms never forget any information they have gathered, and past lessons they have learned.
  • Algorithms are never biased, corrupt, or serve hidden interest.

One of the fastest growing among these is the I Know First Algorithm. It is unique in that it predicts the flow of money in almost 2,000 markets from 3-days to a year.  It is managed by I Know First holding, which is attempting to break the stigma of HFT (high frequency trading) to show that an accurate long term forecast can yield similar earnings with much lower risks than HFT. These long term predictions are also much more suitable for long term investors such as pension funds, insurance companies, and banks. Clients receive an output table with three indicators: the ticker, the signal, and the predictability.

Currency Forecast

Currency Summary:

United States Dollar

The USD is unique in that it is the base currency for many other currencies. Because of the significant impact any movement in the USD causes on the entire market, many currencies have a positive or negative correlation with each other, relative to the USD. For example The USD/JPY currency pair tends to have a positive correlation with the USD/CHF and USD/CAD currency pairs because they all use the U.S. dollar as the base currency.

USD/EUR Currency Pair

Because the US dollar and Euro make the world’s largest currencies, many corporations conducting business in both areas tend to use currency trading to hedge their exchange rate risk. Because the pair is so popular arbitrage (the practice of taking advantage of a price difference between two or more markets) is very difficult. The currency pair is also very liquid, as there are always traders wanting to buy or sell making the bid-spreads very small.

Actual Forecast from I Know First performance review:

IKF analysts ask the Algorithm for a particular currency pair, or set of pairs, with a particular time period.  A client looking to invest in currencies for the 3 months period from July 25th – October 25th requested a breakdown of the systems forecast. The algorithms then generates a table, and sorts the tickers by signal strength (from positive to negative) for that particular time period. When assets do not reach the necessary predictability threshold (the algorithm is not confident enough in its own results) they get filtered out of the table. Below is the actual forecast table and forecast performance review.

The July 25th 3 months forecast recommends the client the following currencies as investment options.

Currency Forecast


What has the algorithm forecast right and what wrong:

  • The total hit ratio (accurate forecast) of the algorithm was 73.91%.
  • 6/8 of the strongest signal pairs had positive returns.
  • 3/5 of the depreciation signals were correct.


The impressive results are only a small fraction of what the IKF Algorithm can do. Technology has been taking over every problem humans had over the last century. It was only the high unpredictability of financial markets that prevented computers from replacing human traders and analysts; however, with the advancement of neurological and DNA programming it is now a new era for financial trading. Although IKF is the most advanced and accurate algorithm yet, it is interesting to see when large trading firms and banks enter the market of long term algorithmic forecasting, and if they do so, if it wont be too late (Neurological and DNA algorithms require many years to evolve themselves into an accurate consistent trading algorithm).

I Know First Research is the analytic branch of I Know First, a financial start up company that specializes in quantitatively predicting the stock market. This article was written by Daniel Hai one of our interns. We did not receive compensation for this article, and we have no business relationship with any company whose stock is mentioned in this article.



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