TWAP Order

A TWAP order — time-weighted average price — takes one large order and breaks it into many small child orders released at even intervals over a chosen window, so the average fill lands near the average price of that window rather than at whatever a single market order would have swept through. Most exchanges and trading terminals expose it as an execution algorithm: you set the total size, the duration and sometimes a price limit, and the engine handles the slicing. Its purpose is to trade a position larger than the book can absorb at once without paying for that size in one go. The cost is that you accept the market's drift during the window: if price runs away from you, a TWAP finishes at a worse average than an immediate fill would have. That makes it a poor choice when you have a directional view you need expressed now, and a good one when you are rebalancing, accumulating, or exiting a size that would obviously move the book. Two practical notes. A predictable clock is readable by other participants, so venues usually add randomisation to the interval and the slice size. And a TWAP does not remove execution risk, it spreads it — an outage or a halt mid-window leaves you part-filled with an unhedged remainder.