A VWAP works best for smaller trades in trending market. B one disadvantage of VMAP is it is senstive to trade size or market conditions true or false
VWAP can be distorted by a large trade, making the VWAP look better than it really is. VWAP can look better than it really is in a trending up market, making it possible to game. So A is false and B is True
both are false. Anyone can explain B?
B is true, not sure about A. The comment about trending leads me to believe to it isn’t true.
VWAP= dollar volume divided by shares traded. One trader can dominate the VWAP if it is illquid. To look good if the market was trending upwards, he would wait untilt he next day to record a price that is not the highest of the day (as he would push the VWAP higher if he bought at the end of the day making him look bad). he he wanted to sell and VWAP was trending lower, again he would make the trade the next day so he wouldn`t look bad. He could look good too depending on the trend. Int he end it can be gamed.
But the trade size is small so I think it is True for both A and B
both wrong VMAP “Works best for comparing smaller trades in nontrending markets” not senstive to trade size or market conditions
Right. Went back to check it. VWAP - Smaller trades for non trending market
goodman, seriously… CFAI V6 pg 62 Q9a, Trade size absolutely affects VWAP.
pg 29 check it
also pg 24 V6 last paragraph. the VWAP can be distorted on one huge trade. it can be gamed.
it is not sensitive to size and market so it is easily be gamed. suppose your trading is 80% of the market , the VMAP is largely decided by your trading and push price up, your trading cost based on VMAP could still be low .
I think were saying the same thing. because its not sensitive to trade size it makes it a disadvantage. Clear as mud I guess.
It`s like a double negative in the book.