TWAP, or Time-Weighted Average Price, is an algorithmic order type, which utilizes the strategy of executing trades at equal intervals over a specified period of time. The TWAP strategy is optimal for executing large orders at a better rate by splitting them into smaller amounts, which will be traded evenly over time at the respective dynamic market price. This strategy can also be utilized during times of high volatility, regardless of whether the market is going up or down.
To place a TWAP order on the Spot Exchange, you have to:
- Select ‘TWAP’ on the upper-right corner of the Buy/Sell panel.
- Enter the amount you wish to trade.
- Enter the number of trades to be executed in the ‘Split’ field either by hand or by using the interactive slider. The maximum number of splits you can select from will vary depending on the trading amount you enter.
- Set the time between orders to either 10, 20 or 30 seconds through the ‘Execution Interval’ slider.
𝙀𝙭𝙖𝙢𝙥𝙡𝙚 : You decide to place a TWAP order to buy 1 BTC by selling USDT from your Trading Balance. You will be shown the amount of USDT required to obtain 1 BTC at the current market price. Alternatively, you can enter the USDT amount you wish to spend on the purchase and you will be presented with the BTC output amount based on the Spot price. Setting the ‘Split’ number to 1647 means that your order will be divided into 1647 parts. In this case, because the selected ‘Execution Interval’ is 10 seconds, the system will perform 1647 orders with 10-second intervals between each trade. The total time it takes to perform all trades can be calculated by multiplying the number of splits by the execution interval time. Based on our selected values, the calculations will be as follows:
1647 trades x 10 seconds = 16470 seconds
16470 seconds / 60 ≈ 274.5 minutes
274.5 minutes / 60 ≈ 4.5 hours
𝗜𝗺𝗽𝗼𝗿𝘁𝗮𝗻𝘁: Since the Spot rate constantly fluctuates for all trading pairs, the total amount of the asset that you acquire in the end may be different from the initial value shown on your screen at the time of placing the TWAP order.