VWAP and TWAP market orders

Does anyone know how the VWAP or TWAP algos work for IB? I’m confused about market vs. limit orders… If I place a VWAP order where I set price equal to market and also click “attempt to not take liquidity”, what kind of orders is it sending? Presumably, if it is sending market orders, I would always be paying a spread and would then be filled at VWAP + spread?

Typically for a VWAP order, IB has the 20-day intraday volume pattern, and they map your order to the pattern. Most volume patterns start heavy in the morning, lighten up through lunch, and then get heavy towards the close.

So, if you put your order in an hour after the open, the VWAP price is going to be heavily weighted towards the close.

VWAP is most useful for very large orders.

The VWAP algo places both limit and market orders. There are some other settings that determine how aggressive the VWAP should be (max percentage, end time). If you set it to be aggressive then you kind of force it to use more market orders. If you give it plenty of time, then it will wait patiently at the good side of the spread. So the amount of spread you pay depends on the circumstances and your other settings.

VWAP set to “don’t take liquidity” will attempt to fill your order proportionally with the stocks volume over the allotted time. It will post non-marketable orders as long as they are getting filled at the desired pace, but will submit marketable lots if it falls behind.

You’re misunderstanding market vs limit though. Market means the order will continue to submit lots and try to fill regardless of changes in price over the day. Limit means you assign a fixed price point at which the order will stop filling. So if the stock is currently at $10 and you aren’t willing to pay more than $11 then put in $11 as the limit.