The purpose of TWAP algorithm trading strategy is to reduce the impact of trading on the market as much as possible while providing a lower average transaction price, so as to achieve the purpose of reducing transaction costs. TWAP (time-weighted average price), time-weighted average price algorithm, is the simplest traditional algorithm trading strategy.
The purpose of VWAP algorithm trading strategy is to make the opening transaction as close to the market as possible. Judging from the definition formula of VWAP, in order to keep up, it is necessary to submit the split sheet according to the proportion of the real market turnover, which requires forecasting the market time-sharing turnover.
Algorithm transaction analysis
Algorithm trading, also known as automatic trading and black-box trading, uses electronic platforms to input trading instructions related to algorithms to execute preset trading strategies. The algorithm contains many variables, including time, price and transaction volume, or in many cases, the instructions are initiated by "robots" without human intervention.
Algorithm trading is widely used in investment banks, pension funds, mutual funds and other institutional investors, with the purpose of dividing large transactions into many small transactions to cope with market risks and shocks. Seller traders, such as market makers and some hedge funds, provide liquidity to the market and automatically generate and execute orders.
The above contents refer to Baidu Encyclopedia-Algorithm Trading.