Is this how stock trading works? [closed]

Question

This is a very basic question about the Stock Exchange, and I was looking for some concrete answers with a general understanding of how it works.

When a Stock Exchange is open for business in a country showing Public Limited Companies which are floating on said Stock Exchange, I assume that people within that country get 'signals' as to whether the current share price is going up, or down, before someone from another country, around a millisecond faster? Thus, if one could quickly stop time with a magic watch, walk across the Earth to another country, and quickly lock in a trade they would make the correct decision resulting in profit?

I will note, however, that the United States of America seems to use some form of lag, on purpose, so that they get up to date information which Tom Scott reports on.

Why do I ask? Because I have developed a physics technique to transfer a flag (which could represent a price going up or down) from a country, to another country, faster than anything currently available on the market. I believe I could pay off my student loan with this if I can hook up my physics device to a computer, and have a receiver in another country that inputs the trade.

Edit 1: to clarify I am happy to trade anything, for example foreign currency exchange (FOREX), so long as me knowing what a company within a country does quicker than everyone else gives me a competitive advantage.

Edit 2: I assume if I am trading on the London Stock Exchange, but knew something about the New York Stock Exchange before the London one I would have an advantage? I know nothing so please correct me.

Answer 1

Because I have developed a physics technique to transfer a flag (which could represent a price going up or down) from a country, to another country, faster than anything currently available on the market.

No, you haven't. Market Information these days travels almost instantaneously and in general a lot faster than trades can actually be executed. Your "new" system would also need to interface with both ends of the Information chain and the Interfaces themselves would most likely be the bottleneck.

Answer 2

If we assume that you've made a significant advance in communication, the easiest option would be to do arbitrage. If you identify the same stock, commodity, or currency pair trading on two exchanges at the same time, you could buy on the exchange where the item is cheaper and sell on the exchange where the item is more expensive and make money on the difference.

As a practical matter, however, this is very unlikely.

• It is already possible (and very common) for high-frequency traders to send this sort of information around the world at essentially the speed of light. Most of the time, the information is going to go via terrestrial fiber optic cable but worst case it'll bounce off a satellite. Either of those are essentially light speed communication (though the distance for something involving a satellite will obviously be greater than the point-to-point distance).

  If we assume you're competing with fiber, you'd need to beat ~0.7c (possibly faster, this article is several years old). If we assume you're going up and down to a satellite in low earth orbit, that adds at most 4,000 km which light would travel in roughly 13 milliseconds.

  If your device can beat a direct fiber connection, there is the potential to profit on arbitrage. Otherwise, your device would need to be able to transmit information faster than the satellite could between two exchanges that traded the same item and weren't connected by fiber. If such an exchange & commodity pair exists, it is likely that it would already be economically feasible to connect them with fiber to do arbitrage and that somebody would already have laid that fiber so you'd need something where direct fiber connection wasn't possible. It's hard for me to think of a physical reason that you couldn't do a fiber connection but there are lots of small exchanges in the world, maybe there are political reasons that one is accessible only via satellite.

• If you were going to exploit microsecond advantages, you'd have to be a high frequency trader. That's going to involve several million dollars worth of infrastructure to do things like host your servers as close as physically possible to the two exchanges, writing hyper-optimized code to execute your trades, a significant amount of trading capital to be able to make money on tiny price differences, etc. If you have student loans, I'll safely assume that you aren't already wealthy enough to do this so you'd realistically need to sell the device to an existing high-frequency trading firm.

If you actually have a device that transmits information faster than the best fiber optic cable in the world, that would be a significant achievement that should generate plenty of scientific interest.

Answer 3

Theoretically Yes. Not sure for stocks but for FX. If you are able to know that the exchange rate goes up/down you might be able to make a $. BUT you are bound by your brokers trade delay, so practically nope.