TWAP (Time Weighted Average Price)

TWAP, or Time Weighted Average Price, is both a benchmark price and an execution algorithm strategy. As a benchmark, TWAP is the average price of a security calculated by dividing the sum of prices at equal time intervals over a defined period by the number of intervals — giving equal weight to each time period regardless of volume. As an execution strategy, a TWAP algorithm slices a large order into equal-sized pieces and executes them at regular time intervals throughout the trading session, ensuring the average execution price tracks the TWAP benchmark. Unlike VWAP (which weights by volume), TWAP is preferred when an investor wants time-distributed execution — for instance, in illiquid securities where volume-based slicing would concentrate too much trading in a narrow window.