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I would like to ask about maybe obvious thing for many people, but cannot find a good answer for it.

In many, many places I see OHLC data along with OHLC analysis tools.

As I deduce step by step in my calculation I think the Volume Weighted Average Price (VWAP) is the better choice. I see OHLC as a lossy compression of price and VWAP as a lossless compression of price information.

I understand OHLC is faster for CPU/memory to process, but what are the other advantages/disadvantages of using OHLC and VWAP?

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2 Answers 2

up vote 5 down vote accepted

Both are for aggregating tick data, but they have very different uses. OHLC is generally for visualizing price movements, while VWAP is often a target price in an algo order. That is, an asset manager may wish to get filled at the VWAP by submitting an order to an algorithmic execution service. The asset manager will then see OHLC bars on his screen throughout the day.

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You are comparing apples and oranges here. OHLC is a concept of representing compressed data, the 4 data points representing the beginning, end, and extremes prices (or any other metric) traversed in between a specific time frame.

VWAP is a concept of expressing price in combination with traded volume. It has nothing to do with time compression. In fact you can get a value for VWAP at any millisecond during the trading day.

Two entirely unrelated concepts. I am happy to delve more into the topic of each if you so wish but you first should really delineate each from the other.

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