Current Month TWAP

The Current Month TWAP

The Current Month TWAP is the time-weighted average price (TWAP) of a security for the current trading month. The TWAP is an early algorithm that was used by high volume traders to exute large orders over a specified time period. Today it is only used as a benchmark when volume data is not available.

Indicator Description

The Monthly Time Weighted Average Price (TWAP) is an average price that reflects how the asset’s market price has changed over time. The simplest version of a monthly TWAP is based on time slicing. On a time-based chart, such as a minute chart the TWAP is calculated as the arithmetic mean of all data points. On tick-based charts all data points are weighted by the bar duration.

Trading algorithms that try to match the TWAP are typically based on a uniform time-based schedule. The Volume Weighted Average Price (VWAP) calculation is today considered to have replaced the TWAP approach. Accordingly, the Current Month TWAP should only be used with uniform volume, or when no volume data is available. You may compare the monthly TWAP output by adding it to a Monthly VWAP chart. On our blogs we also have posts discussing VWAPs in higher timeframes as well as different approaches to trading the VWAP.

The indicator can be set to calculate for the entire trading month. Alternatively,  it can be set to calculate for custom hours such as the regular session. When a custom session is selected the TWAP calculation will pause outside the selected custom hours. In case that there is a technical break inside the selected session, please select “Technical break in session” and enter start and end time for the technical break. The TWAP further comes with time-weighted standard deviation bands. As the TWAP does not use volume information, it should be set to “Calculate” = “On price change”.

The indicator that can be downloaded here will calculate an accurate monthly TWAP and bands when applied to high resolution charts. When used with higher timeframe charts, the plots may be one or a few ticks off the correct value.

Our Indicator Library also features the Daily TWAP, Weekly TWAP, N-Monthly TWAP, Daily Median, Daily VWAP, Weekly VWAP, Monthly VWAP, N-Monthly VWAP, in addition to our Premium VWAPs.

The indicator is available for NinjaTrader 8.