Intraday TWAP calculation

AI & Machine learning
1

I am new to algotrading and while going through blogs on TWAP , i understand calculated TWAP (lets say last 30 days) is constant through out a given day . 



TWAP = (T1 + T2 + … Tn)/n

where Ti = Twap for a given day.

Ti for a given day = (Open + close + high + low)/4



I have 2 questions and i wonder if you could help answer this.


  1. What is intraday TWAP indicator and how its calclulated.
  2. Lets say i am a broker and a client want to trade large volume order and i decided to use TWAP to lower market impact ( I understand there could be better stratergy to do this … but lets stick to TWAP for now) . should i use last 30days TWAP vs intraday TWAP (or both) against current price to understand if asset is underpriced vs overpriced ? Also (generally speaking) is TWAP stratergy concerned about market prices ? or their aim solly is to finish sucessfully (completely fill the order).
2

Hi Praveen



To calculate intraday TWAP, follow the same procedure as described in the blog. This link might help further clarify the calculation.



Regarding the time period to use for TWAP, I would recommend backtesting the same thoroughly and then taking a decision.



With respect to your last query of TWAP being concerned with market prices, I am not too sure what your question is. Please elaborate on that.



Thanks and Regards,

Rishabh