Glossary · Execution
TWAP
Also: time-weighted average price, TWAP algorithm
Published
TWAP — TWAP, or time-weighted average price, is both a benchmark (the average price of an asset over a period, weighted equally by time) and an execution algorithm that splits an order into equal slices executed at regular intervals so that the realized price tracks that benchmark. It suits orders that can be worked over a defined window without urgency.
The Algorithm
A TWAP algorithm takes an order and a window, divides the quantity into equal clips, and sends one clip at each interval regardless of volume. Its behavior is predictable, which is both its strength and its weakness: it never chases the market, but a sufficiently observant participant can infer the pattern. Randomizing clip sizes and timing within bounds reduces that risk.
When Desks Use It
TWAP suits orders where the goal is a fair average over a period rather than immediacy: a treasury converting a balance over a day, a rebalance with no strong view on intraday timing, or a hedge that should track a period average. In digital assets, which trade continuously, the window can span hours or days including weekends.
TWAP Versus a Block
Working an order by TWAP keeps each clip inside displayed depth, so slippage per clip is small, but the order is exposed to market movement and detection for the whole window. A request for quote transfers the block at once at a known price. The choice depends on urgency, size relative to depth, and tolerance for timing risk.