vwap

Wobbly and all who are wondering about VWAP after the ASX reply to your emails. I did some (lazy) research so if of interest, have a read. The last paragraph from Wilkpedia is interesting and at the bottom a link to a paper on strategies for trading VWAP.

Seems RFE is getting its share of this type of tradin today (as are many others of mine).

cheers


From Wikipedia, the free encyclopedia

VWAP is a trading acronym for Volume-Weighted Average Price, the ratio of the value traded to total volume traded over a particular time horizon (usually one day). It is a measure of the average price a stock traded at over the trading horizon.

VWAP is often used as a trading benchmark by investors who aim to be as passive as possible in their execution. Many pension funds, and some mutual funds, fall into this category. The aim of using a VWAP trading target is to ensure that the trader executing the order does so in-line with volume on the market. It is sometimes argued that such execution reduces transaction costs by minimizing market impact (the adverse effect of a trader's activities on the price of a security).

VWAP can be measured between any two points in time but is displayed as the one corresponding to elapsed time during the trading day by information provider.

VWAP is often used in algorithmic trading. Indeed, a broker may guarantee execution of an order at the VWAP price and have a computer program enter the orders into the market in order to earn the trader's commission and create P&L. This is called a Guaranteed VWAP execution. The Broker can also trade in a best effort way and answer to the client the realized price. This is called a VWAP target execution; it incurs more dispersion in the answered price compared to the VWAP price for the client but a lower received/paid commission.

More on this subject in this PDF which has a reasonable overview of the strategies with VWAP trading

www.plexusplansponsor.com/news.../TP_Spring_2002_Madhavan.pdf