Time Weighted Average Price

Simple Definition of TWAP (Time Weighted Average Price)
  • The average price of an asset over time
  • TWAP is used by traders with high volume, executing the same size trade over and over during a span of time. This is done to not drain liquidity in a single trade.
  • This is also to not affect market perceptions in a single trade.
Definition of TWAP
  • Time-weighted Average Price (TWAP) is a well-known trading algorithm which is based on the weighted average price and is defined by time criterion.
  • TWAP is calculated for executing large trade orders.
  • With the TWAP value, the trader can disperse a large order into a few small orders valued at the TWAP price since it is the most beneficial value.
  • This is basically done to not let a huge order suddenly increase the value of a particular financial asset in the financial market.