TWAP

Example of TWAP Trajectory

The TWAP trajectory executes an order at a fixed rate over its duration, following a linear execution schedule. Unlike VWAP, TWAP does not adjust based on market volume, making it a simple and predictable execution method.

How It Works

• The engine divides the total order into equal parts and executes them at regular intervals over the specified duration.

• Execution proceeds at a constant rate, ignoring market volume and liquidity fluctuations.

When to Use TWAP

• For straightforward execution strategies that don’t require volume-based adjustments.

• When trading illiquid pairs to ensure balanced execution and prevent drastic price fluctuations.

• When consistent and predictable order flow is required.

• In markets with stable or low volume, where volume-based strategies may not be effective.

TWAP Limitations

• Does not factor in market conditions—executing at a constant rate regardless of liquidity, which can lead to suboptimal fills.

• Constant execution rate may miss short-term alpha opportunities and does not respond to price trends.

This trajectory is ideal for traders looking for simple, predictable execution, particularly in low-volume or stable markets.