VP (Volume Participation), a fixed percentage transaction strategy , is similar to the VWAP strategy, both of which track the changes in the real market transaction volume and formulate corresponding order placement strategies. The difference is that VWAP splits the order based on the number of transactions or transaction amount required on a certain trading day. While VP determines a fixed tracking ratio and places orders according to the fixed ratio based on the real segmented transaction volume in the market.
For example, a trading day is divided into 48 segments, each lasting 5 minutes. Orders are placed at a fixed ratio of 10% based on the predicted trading volume. The result of such a strategy is that when the amount of orders to be traded is small, all transactions may be completed before the end of the trading time, resulting in the risk of deviation from the market average price tracking.
Therefore, this strategy is suitable for large-scale order transactions that are planned to be completed over multiple trading days. At this time, an appropriate fixed percentage can be selected so that the transaction can be completed effectively. VP is an algorithmic trading strategy that can better track the market average price.
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