What is Time-Weighted Average Price (TWAP)?

Time-weighted average price (TWAP) is a trading algorithm that is based on the weighted average price of a financial asset over a specified time frame. High-volume traders often use a financial asset's TWAP to spread a large order across numerous smaller orders valued at the TWAP price. This is done in order to avoid abruptly increasing the value of the financial asset due to a sudden, single high-volume order.