Executes an order evenly over a user defined time period. Like VWAP, this strategy manages the inventory of the order through to the end of the user defined period. Unlike VWAP, scheduling is done on an even basis during the chosen period, rather than trying to anticipate the volume curve of the period as VWAP does. So TWAP gives an even exposure to a chosen period, but runs higher risks of market impact as it makes no allowance for predicted volume curve as VWAP does.
Can work well as an alternative to VWAP over short periods, particularly into the close; can be used to work orders on a cash matched basis (e.g. futures vs. cash)
Be careful during periods of low liquidity where impact could be an issue.