Why TWAP?
CoW Swap has recently become one of the first DeFi projects to launch native support for Time-Weighted Average Price (TWAP) orders. TWAP orders spread out large trades into multiple smaller orders. This reduces slippage & price impact and helps traders enter or exit a market position at an average price.
TWAP has been around for a while on centralized exchanges, but CoW TWAP — CoW Swap’s version of TWAP — comes with several important benefits that traders won’t find on CEX alternatives.
Benefits of TWAP orders
Dollar-Cost Averaging (DCA)
TWAP orders help automate the dollar-cost averaging (DCA) investment strategy. DCA involves investing a fixed amount of money in an asset at regular intervals, regardless of the asset’s price, in order to reduce the impact of market volatility.
In highly volatile markets like crypto, the risk of making a large investment just before a sudden price shift is significant. TWAP minimizes this risk by breaking down your investment into smaller, evenly distributed purchases over time. This finds an average market price and helps smooth out market volatility. Want to buy an asset but you’re not sure exactly when to click the “Swap” button? TWAP-enabled DCA means you can forget about timing the market and get the average price instead.
Investors can also use TWAP to sell their positions through dollar-cost averaging. Simply switch the assets you’re swapping and TWAP will help you exit the market for an average price.
Riding the crypto waves has never been so s-moooo-th! 🐮
Reduce your price impact
Large orders move markets and traders often get worse prices as a result. By splitting up large trades into multiple smaller orders, TWAP helps mitigate the negative effects of price impact. A bunch of smaller orders affect prices much less than one big order, meaning you end up getting a better deal for your trades.
Reduce your slippage
Finding the right slippage can be tricky. Set it too low and your order might not go through, too high and you could fall prey to MEV. Using TWAP to split up a large order into smaller parts allows you to use a smaller slippage tolerance for each part. The MEV bots can stay hungry…
Why TWAP with CoW Swap?
Those familiar with CoW Swap know there’s always something extra in our barn 😉. Below are some exclusive benefits you’ll only find on CoW TWAP.
Always receive 100% of your order surplus
CoW Swap searches for surplus opportunities on every order and TWAP orders are no exception. In fact, since TWAP orders are split up into different parts, each part is another opportunity to find surplus for your trade.
In our tests, selling 1,000 ETH in four parts of 250 ETH each allowed us to get a price for the order that was 3.5% better than selling the 1,000 ETH all at once! This was in large part thanks to CoW Swap’s batch auctions that include finding Coincidence of Wants and other price improvements.
Get price protection
After you select the assets you want to trade through CoW Swap’s TWAP interface, you’ll need to indicate the number of order parts you want to use, as well as the total duration over which you’d like your TWAP order to execute. From these selections, the interface automatically calculates each part duration and the amounts you will be buying and selling per part.
Unique to TWAPs on CoW Swap is the “price protection” feature. Price protection ensures that your order will stop executing if the market price of the assets moves by more than your specified percentage.
Get started with CoW TWAP
To get started with TWAP orders on CoW Swap, you’ll first need to ensure that you have a Safe wallet. Currently, TWAP is only available through Safe but support for more wallets will be coming soon.
Don’t have a Safe? No problem! Create one here. After you make a Safe, you’ll also need to upgrade your fallback handler. Learn what this means and how to do it here.
Once your Safe is fully set up, you can access TWAP directly through the CoW Swap order interface.
TWAP orders on Ethereum Mainnet have a $5,000 minimum per order part. This ensures that gas costs are relatively low compared to the entire order size, even with multiple parts involved. Smaller traders can also enjoy CoW TWAP on Gnosis Chain where part minimums are only $5 (and the gas is much cheaper!)
You can find the full how-to guide on CoW TWAP orders here.
As always, on CoW Swap:
- All prices are aggregated from the best available on-chain and off-chain liquidity
- Traders are fully protected from MEV
- Orders are free to place and free to cancel
- Traders never pay for failed transactions
- Transactions are gasless as fees are paid in the sell token
Happy TWAPping!
