Time-Weighted Average Price (TWAP)

TWAP (Time-Weighted Average Price) is a widely used trading algorithm that calculates the average price of a financial asset over a predetermined time interval. High-volume traders often leverage TWAP to execute large orders in a way that minimizes market impact and price volatility. By dividing their orders into smaller, evenly spaced trades based on the TWAP price, traders can avoid causing sudden price movements due to a single large transaction. TWAP is an essential tool for achieving efficient and effective trade execution in various financial markets.