Everything You Need to Know About Price Impact on DEXs

Ever traded on a DEX and noticed the price shift before confirmation? That’s price impact at work. Unlike centralized exchanges (CEXs) with order books, decentralized exchanges (DEXs) use liquidity pools. Your trade size directly moves the price of an asset — sometimes more than you think.

If you want to optimize trades and cut losses, mastering price impact is essential.

Understanding Price Impact

What Is Price Impact?

Price impact is how much your trade changes an asset’s price in a liquidity pool. Larger trades relative to pool size push prices higher (for buys) or lower (for sells).

💡 Example: Buying 10 apples at a stand with hundreds won’t change the price. But if they only have 15 apples, your big order makes the rest pricier. The same logic applies to DeFi pools.

Price Impact vs. Slippage

On liquidity pools, you’ll face:

• Price Impact

• Slippage

Example swapping TON for STON:

• <0.01% Price Impact (low)

• 1% Slippage Tolerance (default)

Price Impact – Directly caused by your trade, due to liquidity mechanics.
Slippage – The gap between expected and executed prices, caused by market moves, not trade size.

💡 Example: Booking an Uber for $20 but paying $25 after surge pricing — that’s slippage.

Mechanics of Price Impact on DEXs

DEXs use Automated Market Makers (AMMs) with formulas (e.g., x * y = k) to set prices. When you swap, token balances in the pool shift, altering the price. Bigger trades create larger deviations.

💡 Example: In a pool with 100 TON and 200,000 USDt, swapping 1 TON moves price slightly. Swapping 50 TON dramatically spikes TON’s price in that pool.

Factors That Shape Price Impact

1. Liquidity Depth – More liquidity means less impact.
   💡 Example: $10K in ETH/USDT on Uniswap barely moves price; same in a $50K pool moves it a lot.

2. Trade Size – Larger trades cause bigger shifts.
   💡 Example: Selling 1 BTC in a huge pool is minor; selling 50% of pool’s BTC is major.

3. Market Conditions – Volatility magnifies impact.
   💡 Example: Panic events drain liquidity, making price swings worse.

How to Reduce Price Impact

1. Split Large Trades – Break big orders into smaller ones.
   💡 Example: Sell $100K in five $20K trades.

2. Use Limit Orders – Lock your preferred buy/sell price.
   💡 Example: Buy ETH at exactly $3,000, not $3,050.

3. Choose High-Liquidity DEXs – Major pools reduce risk.
   💡 Example: Trade on top-tier DEXs over low-volume ones.

4. Adjust Slippage Tolerance – Set based on volatility.
   💡 Example: Use 0.5% in stable markets, 1–2% in volatile times.

Tools to Monitor Price Impact

• Price Impact Calculators – Estimate trade effects.

• Liquidity Dashboards – Track live pool data (e.g., DefiLlama).

Final Takeaway

Price impact is key in DEX trading. Knowing liquidity, trade size, and conditions helps you trade smarter and avoid surprises — whether you’re a DeFi beginner or a seasoned pro.