Take the 2-minute tour ×  I'm trying to calculate the 'true
value' of a stock listed on an exchange. I have access to the
limit order-book (containing all bid/ask quotes) and also all
trades which have taken place (which contain price, amount, date
etc).  The context is from the POV of designing a market-making
algorithm with positive expected profit.  I've tried taking:
• The VWAP of recent trades   • The mid-point of the bid-ask
spread   • The SMA of the mid-point of the bid-ask spread   •
The mean over all prices in the order-book  All these attempts
have resulted in an overall loss, or no-trading taking place at
all. I must be approaching this from the wrong angle and I think
the primary suspect is incorrect true value calculation.  Does
anyone have any advice, or good reference to read-up on?
share|improve this question By "market making POV" do you mean
that you be a price maker as opposed to a price taker most of
the time. i.e. you will sit on the bid/offer with open orders
most of the time? –  And