Description:
Time-weighted average price (TWAP) is an indicator used as part of an algorithm by traders and investors to execute large orders in the market without significantly affecting the market price.
Input Parameters:
- Price Source: The specific data points (such as open, high, low, or close) from each candle in a financial chart that an indicator uses for mathematical computations, enabling the calculation of metrics like the average over a specified period.
- Offset: The offset value is used to access the data of any candle or indicator concerning the current candle. For example, to access the current candle data it will use the offset value of "0", to access previous candle data "-1" offset value will be used, and access data of previous to previous "-2" will be used.
Use Case:
- Trend Identification: In this strategy, the TWAP helps traders identify the direction of the trend. If a trader is looking to enter a long position, they may look for the price to be trading above the TWAP as a sign of an uptrend. On the other hand, if a trader is looking to enter a short position, they may look for the price to be trading below the TWAP as a sign of a downtrend.
This feature can be used in:
- Market Scanner
- Strategy Tester
- Dynamic Alerts
- Multi-Factor Alerts
- Smart Checklist
Do you want to learn more? Check out our Learning Center Article.