An algorithmic execution strategy that aims to fill an order at or near the volume-weighted average price over a specified time period by distributing order slices in proportion to historical or predicted volume patterns. VWAP algorithms execute more aggressively during high-volume periods and reduce activity during low-volume periods to minimise market impact. Institutional traders use VWAP algos to benchmark execution quality, with fills below VWAP considered favourable for buy orders.
Example
“The portfolio manager deployed a VWAP algo to accumulate 200,000 shares over the full trading day, achieving a fill price 2 cents below the session VWAP.”