Price Impact

What is Price Impact?

Price impact is the effect of an order being executed on the market price. It is the difference between the expected price of a trade and the price at which the trade is executed. It is a measure of liquidity and slippage.

CrypTools' Price Impact is a proprietary indicator designed to highlight large trades that have minimal influence on market prices. In visual terms, the greater the size of the trade and the lesser its effect on the price, the larger the dot displayed. This allows traders to quickly assess the market's reaction to significant trades.

How does Price Impact work?

Internally, the system gathers trade information from each perpetual contract instrument available on Bybit. Using this trade feed, we calculate the relationship between the size of a trade and its subsequent price change. Essentially, the focus is on identifying large-volume trades that result in minimal price fluctuations.

Normalization Process: The "Score" Metric

After calculating each trade's Price Impact, we standardize these values into a unified "Score." This normalization is essential for ensuring that the data is comparable across different assets, each with its own trading behavior. The Score allows traders to reliably assess the market's reaction to large trades across various instruments.

Data Source: Where Does the Information Come From?

The Price Impact indicator relies on comprehensive trade data to perform its calculations. We directly access this information through Bybit's websocket API, ensuring real-time accuracy. Once collected, the data undergoes a process of normalization, cleansing, compression, and storage on our servers to make it readily available for indicator computation.

By integrating these elements, the Price Impact indicator serves as a valuable tool for traders, offering real-time insights into market resilience or sensitivity to large trades.