No. of Recommendations: 1
For a few months now, I've been using some of the rudimentary trading algorithms provided through Fidelity's Active Trader Pro 9.8 (under the "Directed Trade & Extended Hours" tab). I most often use their VWAP (Volume Weighted Average Price) algorithm, which attempts to give you the average market price (volume weighted) from the time you place the order until the end of the trading day. It accomplishes this by placing a series of smaller orders at various times through the day, and it's useful when moving into (or out) of fairly large positions (relative to trading volume). I've also used their Target Volume (TV05, TV10, & TV20) algorithms, which breaks your limit order into smaller lots, in an attempt to reduce your market participation (over some interval) to a percentage of the total volume (5%, 10%, or 20% are available).

I can convince myself that this has helped a little, but I haven't figured out a good way to quantify it. A typical metric is to compare your actual price to the VWAP, and so I have tried to estimate what I would have actually settled for with a limit order, and compare that to what I actually got with the VWAP, but I haven't been systematic about this at all! There are times when I'm confident I would have gotten a better price without the algorithm, and other times when the opposite is true (depending on whether I'm buying or selling and whether the market is going up or down).

I'm interested in what experiences anyone else here has had with algorithmic trading in a retail account. Other than some advice (from Elan?) a while back on setting limit buy/sell orders at near the bid/ask, and then periodically modifying the limit price until the order is executed, I really don't remember much discussion here about the actual mechanics of placing trades.

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