1. What is Price Impact in Forex?

Price impact measures how much a trade of a given size affects the market price. It quantifies the market impact of a trade relative to the available liquidity in the market.

2. How Does the Calculator Work?

The calculator uses the Price Impact formula:

Where:

• Trade Size — Size of the trade in lots
• Market Depth — Available liquidity at the desired price level in lots

Explanation: The formula calculates the percentage impact a trade will have on the market price based on the ratio of trade size to market depth.

3. Importance of Price Impact Calculation

Details: Understanding price impact helps traders manage execution costs, optimize trade sizes, and minimize market impact when entering or exiting positions.

4. Using the Calculator

Tips: Enter trade size and market depth in lots. Both values must be positive numbers. Market depth should be greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What is considered a high price impact?
A: Generally, an impact above 10-20% is considered high and may significantly move the market price against the trader.

Q2: How does market depth affect price impact?
A: Deeper markets (higher market depth) can absorb larger trades with less price impact, while shallower markets show greater price impact for the same trade size.

Q3: Can price impact be negative?
A: No, price impact is always a positive percentage value representing the market impact of a trade.

Q4: How accurate is this calculation?
A: This provides an estimate. Actual market impact may vary based on market conditions, volatility, and order type.

Q5: Should I use this for all trade sizes?
A: This calculator is most useful for larger trades where market impact is a concern. For very small trades relative to market depth, impact is negligible.