Time-weighted average price (TWAP) orders can be described as a strategic algorithm applied to transactions in the Online Crypto Trading market; within a specified time period. This algorithm is expected to carry out the instructions; that is a TWAP order, to fulfil the specific goals of the crypto trader while being uninterrupted by market fluctuations.
Choosing TWAP order
Making profits in Online Crypto Trading can be achieved easily by executing simple but highly effective algorithms that will ensure that you are smart with your transactions. A TWAP order is extremely practical and functional as it targets your financial goals and applies specific functions throughout the customized time length to get the best results. A simple explanation is that a TWAP order carries out its execution with random and frequent buying and selling of the cryptocurrency to ensure profitable trade at the end of the time cycle. TWAP orders are highly lucrative when you wish to execute them on Crypto exchange over short time durations.
Strategy for TWAP order
Making a big trading purchase or sale can directly impact the price of your stock or cryptocurrency and this will affect your end profits. The breakdown of a big order into smaller random orders of high-frequency trades using the TWAP algorithm allows minimal interruption to the market, making it a stable strategy. The algorithm splits the main order into smaller orders called clips, which are executed at random periods to allow the best trading scenario for the order. For instance, if the time assigned for the order is one Trading day, the order will be partitioned in multiple clips that will implement the transactions during the best trading scenarios, throughout the day.
TWAP order Calculations
You can easily calculate your TWAP order algorithm with simple and basic entries for the Opening, Closing, High and Low values for your choice of token or stock. The averages for all these values are noted and fed into the algorithm to calculate and define the TWAP strategy to execute the orders at random periods when the criteria are met. The order entry is treated as the starting point for the execution and the end time defined is treated as the targeted completion duration to achieve these trading objectives. The volume of the trade during these executions is not an important factor in the TWAP order calculation as the transaction can be carried out with whatever volume deems necessary to fulfill the time limitations and profit margins.
Benefits of TWAP Trading
The execution of the TWAP order is extremely beneficial for a seasonal trader as the random trading strategy with small volumes has no effect on the overall market. This allows the trader to carry out their strategy to earn profitable business from the Crypto market without alerting other traders and analysts. The algorithm is time-based and therefore extremely easy to calculate and implement for your desired duration. Big orders can be easily carried out with the TWAP order slicing strategy without impacting the objectives of the trade. This perfectly timed algorithm for the orders fulfils the trading goals with high level of accuracy and no losses.
TWAP order execution is one of the very successful strategies for crypto trading. Investors can constantly and steadily make huge benefits from this operation which requires minimal planning and calculations.