RE: RE: RE: RE: TDno problem.
Say you're a trader and need to buy 1mm shares of CAN. If you go out and buy all of those shares in one shot, you've run out of bullets. It might've been a great call if the stock moved up right afterwards, but if you were wrong and the stock moved down, you have no more shares to buy and try and improve your average. Your manager sees your average price, and looks at the volume-weighted average price for the stock, and your price is way above. If you use an algorithm that buys shares evenly throughout the day, you can never "look bad" because your average price is similar to the VWAP. (It also means you can't look like an all-star, it all depends on your risk tolerance). Traders often decide not to "stand still" on large block trades when the markets are whip-sawing around like they are today. It's very risky to trade in large chunks, so by spreading it evenly throughout the day by using an algorithm, you've protected yourself from buying at an average price way above the VWAP.