VWAP and TWAP differ whenever volume is uneven across the day

VWAP and TWAP differ whenever volume is uneven across the dayDiagram with 5 boxes. Slippage: fill price minus the benchmark price to VWAP: sum of price times volume, over sum of volume; Slippage: fill price minus the benchmark price to TWAP: average of prices at equal time slices; VWAP: sum of price times volume, over sum of volume to Heavy volume at the open and close pulls VWAP away from TWAP; TWAP: average of prices at equal time slices to Heavy volume at the open and close pulls VWAP away from TWAP; Heavy volume at the open and close pulls VWAP away from TWAP to State the benchmark and the slippage rule in the test.Slippage: fill price minusthe benchmark priceVWAP: sum of pricetimes volume, oversum of volumeTWAP: average ofprices at equal timeslicesHeavy volume at the open andclose pulls VWAP away fromTWAPState the benchmark and theslippage rule in the test
Definitions of slippage, VWAP and TWAP, and why they part company. A method diagram with no market figures. Source: Method note on execution benchmarks; settlement regime per SEBI circular of 15 Oct 2026. As of 16 Oct 2026.

Slippage is the difference between a reference price and the fill. A backtest that assumes a fill at the close price looks better than a live order that has to go through the book. Slippage has three parts: the spread, the impact of the order's size, and the price move while the order is being filled.

VWAP, volume weighted average price, is the total value traded divided by the total volume traded over a period. An execution that buys at or below the day's VWAP has beaten that benchmark. TWAP, time weighted average price, is the average of prices sampled at equal time intervals, and an order sliced evenly across time aims at it.

The chart sets the two formulas side by side. When volume is heavy at the open and the close, VWAP leans toward those prices and an even TWAP slice does not. A large order that trades evenly across the day can therefore beat one benchmark and lag the other, depending on how the day's volume fell.

VWAP also sits inside how an index option settles. Before 3 Aug 2026 the settlement price came from the constituents' VWAP over the last 30 minutes, the closing auction price has applied since, and the last 30 minute VWAP returns on 7 Dec 2026 under SEBI's circular of 15 Oct 2026. In a test, the benchmark is a choice to state, and the slippage measured against it should be written next to the result.

Before you trade. Derivatives trading carries a high risk of loss. SEBI's study "Profitability of Individual Traders in the Equity Derivatives Segment (FY25 to FY26)" (August 2026) found that 87.7% of individual traders in equity F&O made net losses in FY26, with aggregate net losses of Rs 91,685 crore. Read the SEBI study