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Best Strategies to Minimize Market Impact: An Expert Guide for Traders
Best Strategies to Minimize Market Impact: An Expert Guide for Traders
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Every trade executed in financial markets leaves a footprint known as market impact—the effect of trading activity on an asset’s price. For traders handling large volumes or operating in illiquid markets, managing this impact is critical to preserving profits and strategy viability. Unchecked, market impact can turn winning trades into losses.
Market impact occurs when buy orders push prices up and sell orders drive them down. This guide explores actionable strategies to mitigate such effects, ensuring better execution quality. The focus is on reducing footprint size while maintaining alpha.
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