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TWAP Meaning

Time-Weighted Average Price (TWAP) is an execution strategy that breaks a large order into smaller trades executed evenly over a specified time period. The goal is to minimize market impact and achieve an average execution price close to the market’s time-weighted average.

TWAP is commonly used by institutional traders when liquidity is limited or when minimizing signaling risk is important. By spreading execution over time, TWAP reduces the likelihood of moving the market against the trader’s position.

In crypto markets, TWAP strategies are widely used by OTC desks, funds, and algorithmic trading systems. However, TWAP does not account for volume distribution or changing market conditions, making it less adaptive than VWAP in some scenarios.

TWAP remains a simple, transparent, and widely adopted execution benchmark, particularly in markets with consistent liquidity and low volatility.

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