Introduction to TWAP Strategy
November 1, 2024 at 03:00 PMWhat is TWAP Strategy?
Time-weighted average price (TWAP) strategy splits your order and places smaller orders at regular time intervals.
This helps prevent sudden market fluctuations due to large orders and allows traders to execute their trades in a controlled manner. With TWAP, traders can take advantage of market volatility while minimizing risk.
The TWAP Strategy Scenario: When users engage in large transactions to avoid causing excessive market impact, they need to automatically split a large order into multiple smaller orders.
How Does TWAP Work?
Total Amount: 96 BTC
Total running time: 4 hours
Frequency: 30s
With the above parameters, our algorithm will begin executing trades at optimal intervals over the 4-hour period.
Total running time = 4 × 60 minutes × 60 seconds = 14,400 seconds
With 14,400 seconds, the TWAP strategy will split 96 BTC into 480 orders (14,400s/30s). Within the total running time of 4 hours, a 0.2 BTC (96 BTC/480 orders) market order will be placed every 30 seconds.
Number of sub-orders: total running time/frequency interval = 14,400s/30s = 480 orders
Amount for each sub-order: total quantity/number of orders = 96 BTC/480 = 0.2 BTC
During the validity period, the TWAP algorithm will split the order into smaller orders and execute them at regular time intervals to achieve a controlled and gradual fulfillment of the total order quantity. The TWAP order will continue to run until its validity period expires or the entire order quantity is completely filled. However, we cannot guarantee full order execution under exceptional circumstances.
TWAP orders are subject to the order limits stated below and may be terminated if certain conditions are triggered.
- Each account can support 50 TWAP strategies running simultaneously, and each trading pair can open a maximum of 5 TWAP strategies simultaneously.
- The order placement frequency for each TWAP strategy can be set from 5 seconds per order to 60 seconds per order.
- All TWAP orders are Market orders (IOC: Immediate or Cancel orders). If an order placed by TWAP is not fully filled under exceptional circumstances, the system will try to match the orders again. If the match fails, the order will be canceled and wait for the next order placement until the TWAP strategy is terminated or ended.
- The TWAP strategy will not occupy any margin before any order execution. Please ensure you have sufficient balance in your account upon order execution or else the strategy will be terminated. Close order (Reduce-only Order) does not occupy any margin.
- TWAP strategy will automatically be terminated if there is an insufficient balance to fill the order, changes to the position mode, position value exceeds the risk limit or open interest limit, and more.
How to Set up Your TWAP Strategy?
Step 1: Access the TWAP page through one of two methods:
-Navigate to Futures in the menu bar, choose Trading Bots, and click on "TWAP" to proceed to the settings page.
-Alternatively, directly select the "TWAP" order type on the Futures trading page.
Step 2: Create your TWAP order with the following parameters:
Margin mode: Consistent with the position mode preference of the selected contract
Total Amount: Enter the total quantity of the order you would like to place, or use the percentage bar to quickly set an order's contract quantity with the corresponding proportion of the account's available margin.
Total Time: Set the running time of the TWAP strategy from 5 minutes to 24 hours, or select one of our convenient preset options at 10 minutes, 30 minutes, 1 hour, 4 hours or 8 hours.
Frequency: Select a placement frequency. The possible options will range from 5 seconds to 60 seconds per order.
Qty (Per sub-Order): Automatically calculated the estimated amount for each sub-order based on entered parameters.
Reduce Only: This is only available in Futures Trading One-Way Mode.
How to Stop Your TWAP Strategy?
How to View Your Order History?
