TWAP (Time Weighted Average Price)
Like a VWAP algorithm the inventory of the order is managed over a specified period of time which may be adjustable during the trade if there are significant changes in market circumstances. The inventory is spread evenly throughout the period thereby giving equal exposure throughout the period. However results may be more volatile than VWAP as no allowance is made for projected activity levels. In addition even spacing of activity over time may increase the likelihood of the algorithm being identified and traded against by others. TWAP is usually used over shorter periods of time, when volume shifts are less likely and can be useful if traders wish to work orders on a ‘cash matched’ basis.