A Comprehensive Examination of VWAP in Algorithmic Trading
Volume Weighted Average Price, or VWAP, is a metric algorithm traders use to enhance their trade execution. VWAP is the average price at which a security has been traded on the day, adjusted for volume, and indicates the market’s consensus price. VWAP indicator is of great use in algorithmic trading as it allows for minimizing market impact when executing large orders and enables the trader to stay on the wave of general trends. Implementing VWAP into algorithms will enable traders to trade closer to the day’s volume-adjusted price, staying competitive without skewing the market.
