What Is TWAP?

TWAP: a simple concept behind some institutional execution strategies.

Time-Weighted Average Price, or TWAP, is an execution benchmark based on the average price over a specified time period.

A TWAP-style execution algorithm may divide a large order into smaller orders scheduled at regular time intervals.

For example, instead of submitting an entire order immediately, it might execute portions every few seconds or minutes.

The approach can help distribute execution over time, although the actual algorithm may adjust to market conditions.

TWAP does not guarantee a good fill or eliminate market impact.

It illustrates a broader principle: institutional traders often have to solve execution problems that are different from identifying a profitable entry on a chart.