Impact cost
Also called: market impact, price impact
The extra cost of a trade caused by the order itself moving the price, measured against the mid-price before the trade.
A market order larger than the quantity at the best price walks through worse price levels in the order book. Impact cost rises with order size and falls with depth, and is especially large in thin markets.
Example
Buying 2,000 shares at an average of ₹100.11 when the mid-price was ₹99.95 is an impact cost of about 0.16%.
Learn more in these lessons
- Market microstructureWhat really happens when an order meets the market?
Related terms
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