Vwap Case Study

In this session, we need to play games with hidden each trader’s ID, which means we cannot find the informed traders from the transaction lists and order lists. What I can obtain from the market is the price movement and the limit orders’ price in the market. Because I am a liquidity trader, who needs to sell 1000 shares, if the price decreases at the beginning 30 seconds, I will sell 1000 shares quickly, since the true value must be lower than $40 and VWAP must allocate between $40 and the true value. On the other hand, if the price increases at the beginning 30 seconds, I can wait until the price converges to the true value and sell shares at that time, due to the reason that true value and VWAP must be higher than $40. This strategy is based on the assumption that all of informed traders may trade to get the profit as soon as possible, pushing the price to move to the true value.
Table 10 is my trading cost for this session, which shows that I had a negative trading cost, and beaten the VWAP. Furthermore, this is the first time that the total trading cost is negative value, which means my trading skills and strategy is becoming mature step by step.
During this session, my objective …show more content…
Although I have been misled by the price volatility at the end of the trading, I still sold most of my shares at a higher price than others. In addition, the informed traders had the biggest advantages, compared with other session, because the feature of this session is hidden ID, which means the informed trader can easily manipulate the share price by set up bid/ask order. Thirdly, this trading frequency is higher than last two weeks because when ID of traders are hidden, informed traders would trade more aggressively than last two weeks, which resulted in the trading price close to the true price more