TWAP vs. VWAP in crypto trading: What’s the difference?

Algorithmic trading automates trades based on predefined rules, enabling 24/7 market scanning and rapid order execution. Common strategies include trend following, arbitrage, market making, and mean reversion. Execution algorithms focus on discreetly entering or exiting positions, with passive order execution strategies minimizing slippage. Time-weighted average price (TWAP) divides orders evenly over time, suitable for low-liquidity or stealth trading. Volume-weighted average price (VWAP) adjusts trade size based on market volume, reflecting market valuation more accurately. TWAP calculates average price based on time intervals, while VWAP considers volume at each price point. VWAP is ideal for active markets to align with market momentum, whereas TWAP is preferable for quieter markets requiring discreet execution. Real-world examples demonstrate TWAP's effectiveness for large, stealth buys and VWAP's integration in platforms like Kraken Pro for optimized trading. Understanding the differences between TWAP and VWAP empowers traders to minimize market impact and achieve better execution prices.