How TWAP works
TWAP, or time-weighted average price, is the average price of an asset over a set period, weighting every moment equally. It is also an execution method: a TWAP order slices a large trade into equal pieces spread evenly across time, so you fill gradually instead of moving the market with one big order. The goal is to pay close to the average price rather than a single, possibly bad, snapshot.
Worked example
You need to buy a large position over an hour. Sent as one market order, it would eat through the order book and push the price up against you. A TWAP order instead buys an equal slice every few minutes for the full hour, so your average fill lands near the period’s time-weighted average and your market impact stays small. The trade-off is that price can drift while you wait.
TWAP versus VWAP
TWAP weights by time alone, splitting evenly regardless of volume; VWAP weights by volume, trading more when the market is active. TWAP is simpler and works well when volume is steady or unpredictable. On Volity, breaking a large order into timed slices is a practical way to reduce slippage on less liquid instruments.
Why it matters
TWAP matters most when your order is large relative to available liquidity, because dumping it at once guarantees a worse price. Use timed execution to blend into the market instead of fighting it. Related: VWAP and slippage.
Learn more in our forex trading guide.
