TY - JOUR T1 - A Better Way to Trade Small Caps: <em>The Power of Volume Volatility in Algorithm Design</em> JF - The Journal of Trading SP - 41 LP - 48 DO - 10.3905/jot.2016.11.2.041 VL - 11 IS - 2 AU - Benjamin Polidore AU - lin jiang AU - Yichu Li Y1 - 2016/03/31 UR - https://pm-research.com/content/11/2/41.abstract N2 - The goal of this research was to study methods of altering the standard approach to volume weighted average price such that it respects stock-specific volume volatility. The early returns are promising, and we think this concept can be applied to other algorithms where inappropriately tight constraints create excess cost. In this article, we review the state of the art for volume forecasting and how these efforts are rewarded. We show the results of a random trial of orders that use a static tolerance around the target schedule versus orders that use a tolerance set by the volume volatility of the stock. The results show less aggressive trading. We also argue that traders should not choose algorithms based on stock characteristics. Instead, algorithm choice should focus on the tradeoff between cost and timing risk.TOPICS: Statistical methods, volatility measures ER -