Market Impact

Market impact refers to the effect that a trade or series of trades has on the price of a security or asset in the financial market. When large orders are executed, they can influence supply and demand, causing the price to move up or down. This change is due to the market adjusting to the increased volume or new information signaled by the trade. Understanding market impact helps traders and investors estimate how their transactions might alter prices and guides them in executing strategies that minimize costs and market disturbance.