What TWAP is
TWAP (Time-Weighted Average Price) is an execution tool, not a strategy. It splits one large order into many equal slices spread over time, so your average fill ≈ the market's TWAP across that window. The goal: enter (or exit) a big position without moving the market or advertising your intent with one giant order.
Key parameters
- •Total size — the full order to work through.
- •Chunks — how many slices (10–100).
- •Interval — minutes between slices.
- •Order type — market or limit per slice.
When to use it
- •Working a large position where a single market order would cause slippage or signal your hand.
When NOT to use it
- •Small orders (nothing to hide, no impact to avoid), or when you must be fully filled *right now* at any price.
The pitfall
TWAP averages over the window — if price trends hard during it, the later slices fill worse. It reduces *market impact*, not *direction risk*. Pick the window with the trend in mind.