In finance, time-weighted average price (TWAP) is the average price of a security over a specified time.

TWAP is also sometimes used to describe a TWAP card, that is a strategy that will attempt to execute an order and achieve the TWAP 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. A TWAP strategy is often used to minimize a large order's the impact on the market and result in price improvement.[1] 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. Volume-weighted average price (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.[2]

See also

References

  1. ^ "Time-Weighted Average Price". River Financial. River Financial Inc. Retrieved 2021-06-25.
  2. ^ "Anchored VWAP". StockCharts.com. Retrieved 2021-04-18.