beating the VWAP

Discussion in 'Strategy Development' started by manustone, Jun 1, 2010.

  1. manustone


    HI All
    I am newbie to trading and it is not really clear what does it mean 'beat the VWAP'.
    I don't understand the math I need to do in order to understand whether I "beat" it or not.

    I have the following 2 doubts:

    1. Is this meaning that the Average Prices of ALL of MY trades ( both BUY and SELL order executed )
    I do during the day must have a better price of the VWAP calculated at the end over all of the trades
    of the day?

    So in terms of formula

    P_avg >= VWAP_end_of_day

    2. Maybe I am confused, but should I make a distinguish between price for BUY order vs SELL order?
    Let me be more clear:
    # If a Buy order is executed, the price should be LOWER than the VWAP of the day
    # If a Sell order is executed, the price should be HIGHER than the VWAP of the day

    So in terms of formula

    P_BUY_avg <= VWAP_end_of_day
    P_SELL_avg >= VWAP_end_of_day

    It is probably a silly concept , but I am really newbie.

  2. MTE


    The term "beating the VWAP" refers to executing a large order at a price that is better than VWAP. In other words, you want to have an average buying price that is below the VWAP, and an average selling price above the VWAP.
  3. Any pointers about how to "beat the VWAP" in terms of trading/execution strategies?