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What Is TWAP (Time-Weighted Average Price) Strategy and How Does It Work

2021-10-13 08:38

What are TWAP (Time-Weighted Average Price) orders?

TWAP (Time-Weighted Average Price) is an algorithmic trade execution strategy that aims to achieve an average execution price close to the time-weighted average price of the user-specified period. A TWAP strategy is often used to minimize a large order’s impact on the market by dispersing the large order into smaller quantities and executing them at regular intervals over time.
TWAP is favored to provide a better execution price in the following scenarios:
  • Order size larger than the available liquidity on the order book.
  • Anticipation of a high price volatility period with no clear up or downward trend.

How to set up a TWAP strategy?

1. Go to Binance Futures and click [Strategy Trading] - [TWAP].
Alternatively, select [TWAP] from the order type dropdown menu.
2. You can click [TWAP Tutorial] to read a guide on TWAP trading. If you are new to TWAP, we recommend reading it before creating your TWAP strategy.
3. Select your desired symbol/contract (e.g., BTCBUSD, ETHBUSD) and enter your trade details: direction (Buy or Sell), trade size, and execution duration.
Once all required parameters are set, click [Buy/Long] or [Sell/Short] to place your order.
  • Trade size: The total trade size you choose to buy or sell. TWAP strategy will aim to execute to fill up to this targeted trade size. The minimum allowed TWAP strategy trade size is set at the equivalent notional amount of 10,000 USD.
  • Total Time: Select the targeted TWAP execution period. The minimum duration is 5 minutes, and the maximum is 24 hours.
4. Check your order details and click [Confirm].
Please make sure that you have a sufficient margin balance in your Futures Wallet. Your TWAP strategy will be terminated if any TWAP order fails to meet the margin requirements.
Please take note of the following margin check for a TWAP order:
  • There is no margin check for reduce-only orders;
  • Cost = (Total Size * Last Price) / Leverage
  • Pass if Cost < available for order

How to view my TWAP orders?

You can view your running TWAP orders, including average filled price, strategy duration, strategy status, and total size, from the TWAP interface under the [Running] tab on the Strategy Overview panel. You can also monitor the order progress under the [Filled%] column to check the current executed amount percentage.
To manually terminate a running TWAP order, click [End] under the [Action] column.
To view all TWAP trade history, go to the [History] tab on the Strategy Overview panel.
Additional Notes:
  • TWAP supports USDⓈ-M contracts and can be used with the Multi-Assets Mode.
  • For quarterly contracts, TWAP orders must end one hour before the contract’s settlement time. For example, if you create a TWAP order at 07:00 with a 4-hour duration, the TWAP order will end at 11:00. Please note that TWAP strategies will automatically pause during system maintenance and resume after it finishes.
  • TWAP supports up to 10 simultaneously running orders per account. You can place multiple TWAP orders for the same symbol.
  • The transaction details will not be displayed until all TWAP orders are filled. Only partially completed orders will be displayed. You can view the transaction quantity, average transaction price, and trading fee.
  • TWAP orders do not guarantee execution. Orders will be filled with the best effort, subject to market liquidity and volatility.
  • Manual trading, canceling of orders, or closing of positions on the same contract/symbol on the USDⓈ-M trading interface will not impact the total size of the TWAP orders.