What is price impact?
Last modified:
Price impact is the shift in a token's exchange rate caused directly by your trade. In an automated market maker (AMM), every swap changes the ratio of tokens in the liquidity pool, and that ratio determines the price. The larger your trade relative to the pool's depth, the more you move the price against yourself.
How it works
AMMs like the CenturionDEX Protocol price tokens using a deterministic formula (e.g., the constant product x · y = k). When you buy token A with token B, you add B to the pool and remove A. The pool's formula then recalculates the exchange rate to reflect the new reserves. The gap between the market price before your trade and the effective price you receive is the price impact.
- Deep pools absorb large trades with minimal price movement.
- Shallow pools shift significantly even on modest trades.
Why it matters
High price impact means you are paying materially more (or receiving materially less) than the displayed market rate. Before confirming a swap, check the price impact figure shown in the interface. If it exceeds a few percent, consider splitting the trade into smaller orders or routing through pools with deeper liquidity.
For a detailed breakdown, see Swaps — Price Impact.
Price impact vs. slippage
Price impact is deterministic — it is a function of your trade size and the pool's reserves at the moment you trade. Slippage is stochastic — it results from other transactions executing between the time you submit and the time your transaction is confirmed.