Glossary · P
Price Impact
The change in token price caused by your own trade on an AMM. Large trades deplete one side of the pool reserve, driving the price up for buyers and down for sellers. Price impact is deterministic and calculable before executing — DEX interfaces show estimated price impact as a percentage. Price impact is distinct from slippage (which also includes price movement from other traders). Larger trades in shallower pools have higher price impact.
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How Price Impact works in practice
Price impact is how much your own trade moves the price against you. It is a function of trade size relative to pool depth, and unlike slippage from market movement it is entirely predictable before you sign.
Worked example
Trading 1,000 USDC against a 10,000,000 pool moves the price negligibly. Trading 1,000,000 against the same pool moves it substantially, and your average fill is materially worse than the quoted rate. Ten trades of 100,000 through a router will usually beat one of 1,000,000.
Figures are illustrative and chosen to be checkable, not live market data.
The mistake that costs people money
Confusing price impact with fees. A 0.3% fee on a large trade can be trivial next to 5% of price impact. Interfaces display both — the second is usually the one that matters.
Price Impact: common questions
- What is Price Impact?
- The change in token price caused by your own trade on an AMM. Large trades deplete one side of the pool reserve, driving the price up for buyers and down for sellers. Price impact is deterministic and calculable before executing — DEX interfaces show estimated price impact as a percentage. Price impact is distinct from slippage (which also includes price movement from other traders). Larger trades in shallower pools have higher price impact.
- How does Price Impact work in practice?
- Price impact is how much your own trade moves the price against you. It is a function of trade size relative to pool depth, and unlike slippage from market movement it is entirely predictable before you sign.
- Can you give an example of Price Impact?
- Trading 1,000 USDC against a 10,000,000 pool moves the price negligibly. Trading 1,000,000 against the same pool moves it substantially, and your average fill is materially worse than the quoted rate. Ten trades of 100,000 through a router will usually beat one of 1,000,000.
- What do people get wrong about Price Impact?
- Confusing price impact with fees. A 0.3% fee on a large trade can be trivial next to 5% of price impact. Interfaces display both — the second is usually the one that matters.