Trend Participation- Execution Strategy
The Trend Participation Strategy may increase or decrease the participation rate as market prices move in favor or against the reference price. The reference price may be provided by trader or automatically calculated by strategy.
When & Why to choose Trend Participation?
- To minimize the market impact and market risk. The Tend Participation strategy may execute at better prices than vanilla strategies like VWAP, TWAP and POV.
- The trader may choose to decrease participation rate when market prices move away from reference price. This suits the mean-reverting behavior of prices. Example: the reference price may be a Moving Average and participation rate may be reduced when prices move away from the moving average value.
- The trader may choose to increase participation rate when market prices move away from reference price. This suits momentum traders who want to take a position with minimum market risk while compromising with market impact. Example: the trader wants to buy asap when current market price is 8500. If the prices rise from 8500 to 8520, the strategy will increase participation rate so that the trader does not lose profits from the predictive upmove.
- Suitable for traders who use Technical Analysis
(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
Momentum|Value: Momentum decreases participation rate when prices move against and Value increases participation rate when prices move in favor
%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.
Aggressive|Neutral|Conservative: a given execution style; in aggressive the strategy will try to compromise other parameters while in Conservative the strategy may not be able to completely fill the order.
Reference Price: This may be a fixed value or based on a technical indicator