Weighted Average Execution

Weighted average execution is a trading approach that aims to achieve a target price by filling an order in multiple smaller tranches over a period of time. By breaking a large trade into smaller pieces, the trader avoids exhausting the liquidity at the best price levels all at once.

The most common forms of this strategy are Volume Weighted Average Price and Time Weighted Average Price, which benchmark the execution against market activity. This method is crucial for managing the market impact of large orders in digital asset markets where liquidity may be thin.

It ensures that the final average price paid or received remains close to the market benchmark. This systematic approach reduces the risk of buying high or selling low due to temporary order book imbalances.