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What is Price Impact?

Price impact refers to the difference between the expected price of an asset and the actual price received due to the trade's effect on the market. It occurs when executing swaps in liquidity pools, where large trades relative to available liquidity can shift the asset’s price.

Why does Price Impact occur?​

Price impact happens because decentralized exchanges (DEXs) rely on automated market makers (AMMs) rather than order books. When you swap a large amount of a token relative to the liquidity in the pool, the pool adjusts prices based on supply and demand, causing slippage.

How can I reduce Price Impact?​

  • Trade smaller amounts – Large swaps cause higher price impact. Splitting the trade into smaller transactions can help mitigate this.
  • Use more liquid pools – Swapping tokens in pools with higher liquidity minimizes price impact.
  • Choose better timing – Trading when liquidity is high and volatility is low can reduce price movement.
  • Check price impact warnings – Many DEXs provide alerts when a trade has significant price impact. Always review these before confirming a transaction.

What is the difference between Price Impact and Slippage?​

  • Price Impact refers to how much the trade itself affects the asset’s price due to liquidity constraints.
  • Slippage includes price impact but also accounts for volatility, network delays, and market conditions.

Can I avoid Price Impact completely?​

No, price impact is inherent to AMM-based trading, but you can minimize it by using well-funded liquidity pools and optimizing your trade size. If a swap shows a high price impact warning, reconsider executing the trade or look for alternative trading pairs.

Where can I check Price Impact before swapping?​

Most decentralized exchanges (DEXs) display estimated price impact before confirming a swap. Be sure to check this on platforms like Uniswap, PancakeSwap, or Gem Wallet’s swap feature to avoid unexpected losses.