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.