Formula Investing

Finance a la shmoop what is program trading? okay well watch two episodes of

Big Bang Theory if you first watch one episode of Keeping Up with the [Man and woman watching TV]

Kardashians deal alright no different kind of program trading, program trades

in a Wall Street sense are run by a computer program, hence the catchy name

and it's also called the black box like a program kicks out that if the S&P 500

is down 0.3 percent in an hour and the US dollar has risen relative to the

pound and goog is outperforming the tech index and the moon is in the seventh

house and Jupiter is aligned with Mars then short a million shares of GE like

that would be something that the box would tell you or something like that

and there are a ton of weird mathy things behind the rationale for each of [Math formulas appear]

these trades some of it makes sense to normal people but most of it needs three

PhDs in math and physics and other stuff to translate rationally

well the dangerous thing here about program trades is that usually there is

no human involved when they execute a trade that is it's just computers

talking to other computers but thankfully computers never have glitches [Computer chip blowing off steam]

right they never have mistakes and things generally always run smoothly

when computers are involved right well this is a really smart way to manage

your retirement money just give it all to a black box and assume the guys who

wrote the algorithm knew what they were doing or maybe not [Hacker using a PC]