Glossary

Time-Weighted Average Price (TWAP)

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An asset’s time-weighted average price (TWAP) is the measure of an asset’s average price over a predetermined period of time. TWAP can be calculated for any specified time duration. TWAP trading algorithms seek to optimize a trade’s average price while executing over a specified time period. This is generally used to execute large orders that are expected to have significant market impact.

Related Terms
Volume-Weighted Average Price (VWAP)
VWAP is the measure of an asset’s volume-weighted average price. An asset’s volume-weighted average price (VWAP) is calculated by taking the average of every trade in a specified time period.
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Slippage
Slippage is financial loss during trading as a result of market inefficiencies and illiquidity. Slippage occurs when an illiquid market experiences a sudden, large change in demand or supply, resulting in losses for the buyer or seller.
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Liquidity
Liquidity is a measure of how easily an asset can be traded on financial markets. The depth of an order book is often cited as a measure of liquidity.
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