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I'm trying to better understand the difference between the VWAP and DMA Strategies in Bloomberg through the EMSX function.

As far as I understand is putting orders in Direct market access(DMA) a way to throw them in the market to be filled just like that. Best done when the total volume allows it.

The VWAP or Volume weighted averaged price is calculated by the following:

$VWAP= (∑Volume *∑Price )/ ∑Volume$ ​

This is comparable to the moving average strategy.When the VWAP is under current price it becomes interesting to buy. The other way around when it is above current price it becomes interesting to sell.

What I'm trying to understand is :if for example a trader has Equity he wants to sell and uses the VWAP strategy trough a child order it will only sell the stocks when the VWAP is under current market Price. This until the VWAP rises and goes above the market price then it will stop filling the orders.

Is my understanding of these concepts correct and are there possible alternatives to the VWAP strategy in Bloomberg?

Thanks in advance!

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DMA: yes, you can send market/limit orders (and others if the market allows it)

VWAP: orders will use an execution strategy that aims at giving you an execution price as close as possible to the VWAP for the period over which you trade. So if you enter a trade at 2pm and use a VWAP order with an end time of 4pm, your execution price should be close to the realised VWAP over that specific period. Your confusion seems to come because you think the VWAP order will match the VWAP for the day, which will only be the case if you trade over the day.

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  • $\begingroup$ Thank you that was exactly my confusion! As a follow up question does VWAP automatically enter the order in smaller increments in the market or does it just follow VWAP price and enters it as bulk? $\endgroup$
    – Jorisdrees
    Commented Aug 2, 2019 at 14:13
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    $\begingroup$ It's going to trade in small increments and follow the expected volume curve intraday, so as to end up with a price that is close to realised VWAP. $\endgroup$
    – assylias
    Commented Aug 4, 2019 at 14:27

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