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What Is the Concept of “Market Impact” in Trade Execution?

The temporary adverse price movement caused by the execution of a large order, which increases the total cost of the trade.
Greeks.Live15.11.25

What Is the Concept of “Market Impact” in Trade Execution?

Market impact is the effect that an order's execution has on the price of the asset. A large order, especially one executed quickly, can temporarily move the price against the trader, increasing the overall cost of the trade.

Institutional traders seek execution venues and strategies that minimize market impact, such as using RFQ platforms or smart order routers.

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