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Glossary · PSX term

Impact cost.

Impact cost is how much your own order moves the price against you because of limited liquidity.

Definition

It measures the gap between the price you expected and the price you actually got, and is larger for big orders in thinly traded stocks. The PSX uses impact cost as one criterion when selecting liquid stocks for indices like the KMI-30.

Worked example

Trying to buy a large block of an illiquid stock might push the price up 3% as you fill, that 3% is your impact cost.

Related on PSX Clarity

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