A Review of VWAP Trading Algorithms: Development, Improvements and Limitations

This study explores the development and evolution of Volume-Weighted Average Price (VWAP) trading strategies in algorithmic trading. As algorithmic trading continues to transform the financial industry, optimizing execution strategies becomes crucial for minimizing trading costs and market impact. This research traces the historical development of VWAP, analyzes its integration into various trading strategies, and evaluates recent improvements in trade execution optimization. This paper first provide an overview of VWAP strategies and their significance in algorithmic trading. Then, it details the implementation of VWAP algorithms, including volume prediction techniques and execution methods. The study compares the performance of traditional VWAP approaches with advanced dynamic strategies, analyzing their effectiveness in different market conditions. Furthermore, a discussion is made on the limitations of conventional VWAP methods and an examination is conducted of recent advancements, including improved volume prediction models and adaptive execution algorithms. This research contributes to the growing field of algorithmic trading and offers valuable practical insights for traders and researchers aiming to optimize VWAP-based trading strategies.