Price impact is the effect a trade has on the market price because of trade size relative to available liquidity.
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Short definition
Price Impact is price impact is the effect a trade has on the market price because of trade size relative to available liquidity.
Simple explanation
A large trade in a small pool can move the price significantly.
Why it matters
Price impact helps users understand why trade size and liquidity depth matter before swapping.
Example context
Swapping a large amount in a thin liquidity pool may produce high price impact.