Time Weighted Average Price

Time Weighted Average Price

TWAP is a trading acronym for Time Weighted Average Price.

TWAP is the average price of contracts or shares over a specified time.

TWAP is also sometimes used to describe a TWAP trading strategy, that is a strategy that will attempt to execute an order and achieve the Time Weighted Average Price or better. A TWAP strategy underpins more sophisticated ways of buying and selling than simply executing orders en masse: for example, dumping a huge number of shares in one block is likely to affect market perceptions, with an adverse effect on the price. High-volume traders use TWAP to execute their orders over a specific time so they trade to keep the price close to that which reflects the true market price. TWAP orders are a strategy of executing trades evenly over a specified time period. VWAP balances execution with volume. Often, a VWAP trade will buy or sell 40% of a trade in the first half of the day and then the other 60% in the second half of the day. A TWAP trade would most likely execute an even 50/50 volume in the first and second half of the day.

ee also

* VWAP

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