Now You Can Try High-Frequency Trading
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What is the main topic discussed in this episode?
Your Money Briefing. Money and Market Stories from The Wall Street Journal.
I'm J.R. Whalen in New York. You don't have to be one of the high rollers on Wall Street to try your hand at high-frequency trading. We'll have details on that in a moment, but first, these money items you should know about. The Wall Street Journal's Heard on the Street team asks if the market can handle all the current turmoil currently going on. Fears of a trade war, problems in the tech sector, and central banks removing stimulus might be manageable individually, but taken together could be a formidable test for global markets. The Herd on the Street team also puts the focus on Boeing and whether the aerospace giant could be in some form collateral damage.
What is high-frequency trading and how is it different from other computerized trading?
from a possible U.S.-China trade war. While the Heard team says that China does need Boeing, just the specter of retaliatory tariffs by China placed on aircraft has spooked investors. Aircraft are among the biggest U.S. exports to China. And investors are worried that escalating trade tensions could hit Chinese demand for other U.S. exports like soybeans and corn. And while China's initial response to tariffs has not included soybeans, investors are concerned that if tensions do escalate further, they could extend to include oil seed, a key component in animal feed. China is by far the world's largest importer of soybeans and by far the largest buyer of U.S. beans. This is your Money Briefing from The Wall Street Journal.
Welcome back, everybody. High frequency trading is one of those Wall Street activities often shrouded in secrecy and carried out by a relatively few number of traders. But that's changing now as ultra fast stock trading is available to the public at large. And Wall Street Journal reporter Alexander Osipovich is with us to discuss. So, Alex, can you just explain for a moment to our audience what high frequency trading is?
So high-frequency trading involves the use of computers to buy and sell stocks. But specifically compared to other types of computerized trading strategies, it tends to do this very, very quickly and often in high volumes.
Which startup is letting the public try high-frequency trading and how does its platform work?
Looking at trade executions in, you know, millionths and even billionths of a second and looking at very fine-grained signals and what's happening on an exchange on a micro level. rather than big trends and stocks that we tend to follow.
And there are companies that use software to trade tens of billions of dollars in shares per day, but a crowdsourcing startup company you profile in your story is offering it on a smaller scale, and it's not secret at all.
Yeah, yeah. So I wrote about this company called Alpha Trading Labs, which is a startup just getting underway. And what they've done is essentially they've built technology for high frequency trading, all the infrastructure that goes into it. But they've created an online interface where you can go enroll in it and develop your own high frequency trading algorithm. And then they can test it and check it out.
How do users submit and test trading algorithms on Alpha Trading Labs' platform?
And if they think it would make money, they'll run it in the real live markets and share the profits with you.
So the trader decides what they want to do and then they submit information to the company?
Yeah, basically every high frequency trading strategy is a computer program. So you write a computer program that you say, hey, I want to trade this way in response to this type of stuff happening in the markets. And you submit it to the people who run Alpha Trading Labs and they'll test it and they'll kind of screen it various ways. And the better candidates they'll unleash into the live markets.
All right. It seems like it's not a time for Alpha Trading Labs and other companies to roll this service out or offer it because, as you point out in your story, high-frequency trading as a business often thrives on market volatility, and it's been almost non-existent for the most part for the past eight or nine years.
Volatility is kind of the lifeblood of high-frequency traders. Back in 2008, 2009, when markets were extremely volatile, they were making tons of money.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:00–0:39
2
What is high-frequency trading and how is it different from other computerized trading?
0:39–1:59
3
Which startup is letting the public try high-frequency trading and how does its platform work?
1:59–2:49
4
How do users submit and test trading algorithms on Alpha Trading Labs' platform?
2:49–4:14
5
Why has volatility mattered for high-frequency trading firms in recent years?
4:14–6:04
6
What skills and background do successful high-frequency traders typically need?
6:04–6:51
7
What controversies and regulatory concerns surround high-frequency trading today?
6:51–6:57
8
What should individual traders consider before trying crowdsourced high-frequency trading?
6:57–7:02
Speakers
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