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Execution Algorithms – VWAP, TWAP, POV & the Iceberg

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Definition Execution algorithm: the program that works a meta-order, deciding the size, timing, price, and venue of every child order against a benchmark, under constraints a human sets once.

The desk does not micromanage two thousand child orders. It picks an algorithm, sets the constraints (benchmark, participation cap, urgency) and supervises. The algorithms themselves come in a handful of families, and each one has a signature.

The zoo

VWAP (volume-weighted average price) slices the order against the forecast shape of the day (heavy at the open and close, light through lunch) and is judged by whether it beat the day’s volume-weighted price. TWAP (time-weighted) ignores volume and trades the clock: equal slices, every interval. POV (percent of volume) follows the tape itself, taking a fixed share of whatever actually prints. IS (implementation shortfall, “arrival price”) is judged against the price at the moment the order arrived, which makes it the family most sensitive to urgency: every minute it waits, the market can drift away from arrival.

The execution algo zoo: VWAP trades the shape of the day, TWAP trades the clock, POV trades whatever the market actually prints — and the iceberg shows the book 500 shares of a 40,000-share order at a time the day’s volume, half hour by half hour news spike 9:30 16:00 VWAP TWAP POV VWAP trades the forecast shape (the spike surprises it) · TWAP trades the clock · POV trades what actually prints the same parent order, three different schedules — slice size per half hour: THE ICEBERG what the book shows vs what is there 50.05 sell 1,900 50.04 sell 1,100 50.03 sell 700 50.02 buy 500 50.01 buy 1,300 50.00 buy 2,600 visible: refills every time it empties hidden reserve: 39,500 more behind the 500 you cannot size the buyer from the book — you size him by what he DOES: the level that will not break one parent order, three ways to schedule it against the day VWAP follows the forecast · TWAP follows the clock · POV follows the tape the news spike: VWAP is caught flat, POV scales up instantly — volume begets volume and none of them ever show you their size: the iceberg’s 500 is a 40,000-share order wearing a disguise The execution algo zoo — same order, three schedules, one disguiseTheStrat.AI
The same parent order under three schedules. VWAP follows the forecast, so a surprise volume spike catches it flat. TWAP trades the clock and is trivially predictable, which is why it is rarely used naked. POV scales with the tape automatically: when volume spikes, its slices spike with it, one reason volume begets volume. On the right, the iceberg: the book shows 500 shares, refreshing each time it fills, with 39,500 hidden behind it.

Under every schedule sits the disguise layer, the order-placement tactics: icebergs that show a sliver and refresh, midpoint pegs resting invisibly in dark pools, slice-size randomization, timing jitter. All of it exists for one purpose: to prevent anyone from reconstructing the parent order. This is why counting the book is a losing game, and why TheStrat reads behavior instead: you size the hidden buyer by the level that will not break, not by the 500 shares he shows you.

What this means for TheStrat

Algorithms are the reason simultaneous breaks are violent: when a level breaks, every POV and IS engine watching it raises participation at the same moment, on the same tape. The trigger does not predict the aggression; the trigger is the aggression, arriving all at once. And FTFC is the master readout. FTFC up means the last sale is above the month, week, day, and 60-minute opens at once, so every execution engine, in every window, is being told the same instruction: buy, take the offer: do it this month, this week, today, and right now. You will never see any single algorithm; TheStrat shows you all of them agreeing.

The whole life of a sell meta-order on MRVL, July 1 to 2 2026: the setup bar, the outside hour, the second outside hour expanding the broadening formation as FTFC flips down, then 2d after 2d of follow-through from 271 to 242, the prints shrinking as the order runs out, and finally the 60-minute reversal back up — the order is complete. Aggregated from the 5-minute stream. $240 $250 $260 $270 $280 $290 60-minute Wed Jul 1 Thu Jul 2 setup 3 3 2d 2d 2d 2d 2d 3 2u the reversal — order complete BF expanding Month Jul Week this wk Day Wed Thu July open = Wed open 282.48 week open 272.41 MRVL, July 1–2 2026 — the life of one sell order, five minutes at a time M W D 60 FTFC UP — all four green FTFC DOWN — all four red TIME & SALES one meta-order, start to finish BUY 2,400offer lifted ↑ BUY 5,100offer lifted ↑ SELL 900 BUY 600 SELL 2,200 SELL 3,100 SELL 4,000bid hit ↓ SELL 7,231bid hit ↓ SELL 11,400bid hit ↓ SELL 16,000bid hit ↓ SELL 13,644bid hit ↓ SELL 21,500bid hit ↓ SELL 3,800smaller… SELL 1,200smaller… SELL 400smaller… BUY 4,500offer lifted ↑ BUY 9,200offer lifted ↑ sizes illustrative — the candles are real July 1: the month opens ON this bar — and at the open everything is green: FTFC up, the buy programs in control sellers press the fresh month open — someone very large has started selling the setup bar, then an outside hour… then another: the BF expands — the algorithms are switching sides FTFC DOWN — and the order keeps going: 2d, 2d, 2d, 2d… follow-through from $271 to $242 the prints get smaller — the meta-order is running out of stock to sell then the 60 goes REVERSAL back up: the order is complete. The unwind is over — and the tape told you the whole way real MRVL data aggregated up from the 5-minute stream · background tint = all four timeframe groups agreeing · blue dashes = the opens and the last saleTheStrat.AI
The whole life of one sell meta-order: MRVL, July 1 to 2 2026, real data aggregated up from the 5-minute stream. July opens on this bar and everything starts green: FTFC up, background green. Then someone very large starts selling. The setup bar, an outside hour, another outside hour. The broadening formation expanding live is the algorithms switching sides, and when the last sale takes the week open the board goes FTFC down and the background turns red. Watch the follow-through: 2d, 2d, 2d, 2d, from $271 to $242, the day and month decoupling on Thursday while the order works. Then the prints get smaller (the meta-order is running out of stock to sell) and the 60 finally goes reversal back up: the order is complete, the red background lifts, and the buys return. The expanding BF told you the unwind was starting; the 60-minute reversal told you it was finished.

Where this sits: every one of these programs was told four things, and when their answers align across the opens, you get FTFC.

Related: Meta-Orders · Urgency & Market Impact · Simultaneous Breaks
Back to: Changing Markets →

TheStrat was developed by Rob Smith. These docs are written by Alex Sopa (AlexsOptions) and quote his teaching. Work in progress: spotted an error? Tell Alex.

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