VWAP price at 0.02$/stock on IB : interesting?

G

GeorgeSoros

Hello,

I have just received the new email from IB talking about
VWAP ...

Do you see any interest in this VWAP for swing trading ?

How can I use it smartly ?
 
Unless you need to execute very big orders, don't worry about it. It just sends your order to a computer that sits there and works your order for you.
 
If this is true, then obviously IB has enough confidence in the robot that it will beat/meet the VWAP... another example machine beats the average Joe in the market.
 
yup a simple algorithm can beat a human being....in doing simple arithmetic and then sending an electronic signal

watch out!
 
THe VWAP is the weighted average price of a stock. Mutual Funds calculate this daily and expect to be over it when selling into a stock or lower than it when buying a stock.

They will have to buy 2,000,000 shares of MSFT over the next 3 days. So Mutual Fund calls Morgan Stanley and says can you buy me 600,000 shares of this stock under $60. (MSFT is currently trading at 64.27 as of this writing) Morgan smiles and takes the order saying no problem. Meanwhile that same mutual fund give Merril Lynch an order to buy 600,000 shares under $60. and another firm Saloman Smith Barney 600,000 under $60.

What will happen is they all try to lower the price while buying. Nobody knows what the other broker has.

Sometimes they will get filled way above the VWAP. If they want more business from this fund it is in the Market Makers interest to change the VWAP buy heavily raising the price or lowering the price even if it means a loss. They want the future business of that fund.

If you can figure out when a market maker is trying to manipulate the price short term it is time to jump on board.

good luck trying to figure it out

rtharp
 
rtharp,
not exactly. For fund managers, VWAP "guarantees" that they pay the average price. Thus they get filled on the VWAP price whether the broker makes or loses money doing the trade.

In your example, if fund X asks for VWAP with 3 different brokers, it doesn't matter where the brokers get their fills. If the VWAP is guaranteed, the client will pay the VWAP - the broker assumes the execution risk.
 
That's why I was saying IB is confident enough in the robot (if they use a robot to fill a VWAP order) ability to beat/meat the average Joe.
 

Why not have a chart that tracks the VWAP of the stock?

When the stock price is below VWAP and "confirmation signals" are in sync, buy.

When the stock price trades above VWAP and "confirmation signals" are in sync, sell.

I realized that VWAP for that day is calculated at the end of the day. But you can have real-time VWAP that is calculated with real-time date, I would think.

Perhaps, VWAP could be calculated using the last 390 minutes since there are 390 minutes in one trading day. For example, if it's 10:30am today, then VWAP is calculated using the first 90 minutes of the day, including the last 300 minutes of the previous day.

MGB
 
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