Research On Optimization Of VWAP Algorithm Trading Strategy Based On Trading Volume Decomposition

In recent years,more and more trading institutions in the financial market have applied various algorithmic trading strategies to obtain ideal returns.One of them is the trading volume weighted average price VWAP algorithmic trading strategy.The traditional VWAP execution strategy statically uses past data to predict the future trading volume distribution ratio,and the execution effect is not satisfactory.In this paper,the theoretical methods of trading volume decomposition prediction method,mixing data sampling method and product error model are used to decompose the intraday trading volume of high-frequency stock data into intra-period periodic components,low-frequency components and intra-day non-periodic components.The components perform corresponding forecasting work to obtain the predicted value of each component.Finally,the predicted value of each component is aggregated to obtain the final intra-day transaction volume predicted value.Then,based on the prediction of intraday trading volume distribution,this paper builds a VWAP algorithm optimization strategy based on trading volume decomposition(VWAP_opti trading strategy).The example analysis of this paper uses the high-frequency trading data of ten large-cap weighted stocks such as China Merchants Bank,ZTE and Huatai Securities on the Chinese A-share market.The deviation between the price of the VWAP_opti optimization strategy constructed and the actual VWAP_real price in the market is The TWAP strategy and the traditional VWAP_trad strategy price and the market actual VWAP_real price deviation value are smaller than the average percentage absolute error(MAPD),indicating that compared to the TWAP strategy and the traditional VWAP_trad strategy,the VWAP_opti strategy in this article can better track the market actual VWAP_real price.By comparing the profit difference(RD)between the VWAP_opti optimization strategy constructed in this article and the TWAP strategy and the traditional VWAP_trad strategy when trading the same stock lot,the VWAP_opti optimization strategy is more profitable than the TWAP strategy and the traditional VWAP_trad strategy,which verifies the practicability and advancedness of the VWAP optimization strategy constructed in this paper.