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How to choose strategy
Following things should be considered when choosing a strategy:- benchmark used to evaluate the performance (VWAP, arrival price, closing price, etc.)
- size of order
- liquidity of the product (stock, etc.)
- urgency of a trade
- risk aversion
| Strategy | Benchmark | Liquidity | Notes |
|---|---|---|---|
| VWAP | VWAP | mid to large with good liquidity | passive trading |
| Market Perticipation | VWAP | - | avoid too high mkt impact OK not to complete order uncertain market conditions (historical profile not reliable) take advantage of market move |
| Impl Shortfall | arrival price | - | smaller orders trader has a view on market |
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