The Percentage of Volume (POV), also called as Participation Rate, is a simple strategy which executes the order quantity as percentage of trade volume of the stock in a given time interval.
Example: “Be 10% of volume”- Buy 100,000 shares at %Volume of 10 and not exceeding the price of 125.20 until order completed or market closed.
When & Why to chose POV?
- When executing large orders in a given time window
- When the trader is satisfied with current & expected market price (POV executes close to market price)
- To execute an order totally without limitations on the price band- POV executes close to the market-determined prices
- To execute close to the market price, the strategy may use a predictive algo to decide the next order quantity and price
- To minimize the market impact by not executing large volume too quickly
- POV may execute at market price to keep up with stock turnover, so be careful to specify a price band
(Given below are some general parameters to help you decide what is essential for you; the actual strategy parameters will depend upon your broker)
Start Time: Any orders are not sent to market even if the decision logic generates buy/sell signal before Start Time.
End Time: All open orders are completed before End Time irrespective of the market impact
%Volume: The strategy automatically adjusts the participation rate to limit it to the percentage of stocks total traded volume. Example, if the stock trades 100,000 shares in one minute and %Volume is 10, the strategy will trade 10,000 shares in the same minute.
Price Brand: The desired price band for the average traded price. If market moves beyond the price band limit, the order will not be completely executed
Reference Price: A given price which the strategy will try to better in execution