The Pros and Cons of Big Data for Traders

In an era of digitized information, is it worthwhile for everyday traders and investors to use big data as a resource? Even if you only make a few forex transactions per day and don't believe the question concerns you, think again. Most people outside the IT industry aren't familiar with the term and think it is only somehow related to AI (artificial intelligence), but big data is more. In fact, it's safe to say that AI-related databases are just one kind of very refined big data.

For casual and part-time forex, stock, options, crypto, CFD, and other traders, big data refers to the entire conglomeration of the available information in cyberspace. It's almost impossible to estimate how huge that storehouse is or where it's located, but the volume grows every minute of every day. In the real world of buying and selling securities and other asset classes, trading enthusiasts who enjoy taking part in their favorite markets as buyers, sellers, or long-term holders, big data has its good and bad points. Here's a summary of what you should know before attempting to leverage the power of AI and other algorithm-focused databanks.

Pro: Variety of Applications

If you want to use big data to create customized, quantitative models to use in daily transactions, it's important to know that huge information files have a variety of applications. Typically, account holders on brokerage websites turn to site-based resources that are actually variations of big data files. Common examples include databases of historical stock prices, win-loss records of a particular expert advisor, news archives sorted by ticker symbols, etc. To find out how big data resources are incorporated directly into some of the top online brokerage sites, you can look to https://www.avatrade.com, where account holders can leverage the power of many kinds of historical prices, economic indicators, news stories, and an almost unlimited collection of worthwhile research.

Pro: More is Better Than Less

Have you ever attempted to research a company in order to decide whether to purchase shares? If so, you've probably run into information shortages for firms that are either new or very small. Those who deal with penny stocks run into this problem quite often. It's a perfect example of where you want more information, regardless of the source, value, or size of the file. That's why so many equities investors say more is better when they're hunting for background reports, historical prices, management bios, and anything else about a corporation they know nothing else about.

Con: Being Overwhelmed

The most obvious drawback to having a massive amount of statistics and written materials at hand is related to mental overload. How can a part-time forex enthusiast make good use of a file that contains more than 50 years of exchange rate statistics for a particular currency pair? Unless you're a trained analyst or understand how to read long-term charts, all the numbers and files in the world won't give you an edge. Being overwhelmed is about too much volume and having to deal with overly complex files and stats.

Con: Reliability Challenges

Whenever consumers, and that includes brokerage account holders, gain access to AI or gigantic files, there's usually a question of reliability. Where did the info come from? Who compiled it? How old is it? Is it authentic? Why was it created? Have other people already used it? If so, what were the results? Ironically, inert statistical resources, reports, and databases come with some of the same risks that human experts bring to the table. If an unidentified person told you they could help you make decisions about which shares, currencies, or commodities to buy, wouldn't you ask them a few questions? Of course you would. When using an AI-based or big data-related resource, always strive to find out the origin, age, creator, and similar characteristics of the information before using it. For the most part, investors can usually rely on major brokers for historical and AI resources that come with the sites.

Pro: Quick Decisions

Technical indicators are popular among people who buy and sell securities of all kinds. Standard parameters like moving averages and price volume histories are among the most frequently used of all. If your broker offers several years of prices on all companies listed on an exchange, that can make it easy to do a quick spreadsheet analysis and see whether the 50-day moving average line is about to cross above or below the 200-day line. Anyone who has worked with quantitative indicators understands the importance of using huge sets of statistics to make informed decisions.