IMHO beating VWAP is a valid strategy per se. if you can beat VWAP you can offer to institutional clients a VWAP minus price, which spells ... real business. my (theoretical) understanding is that consistently beating VWAP has less to do with usual day trading strategies but with very intensive modelling on lowest possible level of data. i think it is simply the ultimate scalping strategy. searching for streaks in ordersizes and this kind of thing. detecting the trace of someone big entering the market. BTW the discussion probably depends as well on what time horizon of VWAP we are talking here ... excuse my naivity, but is it really the case that big houses let human beings run the VWAP books?
Thanks for the help guys. I had a theory I was working on along these lines. Lets say Joe Blogs calls in with 1M shares of ZYX to sell over the day. Arent you then essentially daytrading? Day traders start the day with a position and look to exit it by days close at a profit. Would it be possible to apply some day trading strategies to this VWAP problem? As for the algo thing. I am not at a big IBank and non-US. Middle tier firm. Algo trading is not nearly as widespread in my neck of the woods as it is in the US, although it is growing rapidly. I would like to eventually get this down to a systematic thing and would look to program a decent short term set of trading rules to use to trade big orders in the hopes of beating VWAP.
tough call daddy. two man years i would estimate if i had to do the project. (and i did not do it, so it could be north of that.)
great - you will get a more positive response being more open about your position. it did seem a bit odd that someone with so much responsibility (executing those orders) is asking how to do his job! im not having a go - we must all start from somewhere. you may get a few pointers here, but most useful info will be on experience and id try and get as much info from your colleagues as possible. like i said - mostly it will depend on the asset in question. are you focused on a particular sector or bunch of stocks??? good luck.
additional note: no offense intended, but clients who buy VWAP from you are probably not the hottest chicks in town (mine are neither , hope none of them is around ... ), so it might be worth a consideration to become an intermediate of some wholesale VWAP shop and skip something of ... well, maybe not so good an idea, since you cut your own job ...
VWAP: some good pointers here http://www.qwafafew.org/chicago/handouts/morrisseptember2002.pdf#search='vwap%20execution' other than that, www.pipelinetrading.com ... good luck!
No. Most daytraders (specifically those trading NYSE-listed stocks where the specialist is the ax) use orders like yours as safety.