Impact cost


The impact cost of a trade is the cost incurred when the security’s price changes triggered by the high demand from a bulk order.

Example

If we were to buy a million shares at Rs 50, the size of the order may be large enough for the share prices to start rising following the excessive demand, and by the time we complete our purchase, the spot price could have risen to Rs 56, with our purchases paying for the incremental rise for the units left to buy as we go acquiring.