When you buy or sell currencies, the price that you see is not always the price that you are going to end up getting. In smaller trades, the difference can be very minor, but when large amounts become involved, even a very small price shift can make a huge impact. 

This is one of the major challenges that bigger buyers have to manage very carefully. If you have ever noticed prices moving very quickly while you are placing a trade, you’ve already seen just how sensitive the market can often be.

For a larger transaction, that effect will become a lot stronger and this is why several different strategies are often used. 

Why prices change during big trades 

Markets tend to rely on supply and demand. When you place a very large buy order, you will increase demand almost instantly. If there are not enough sellers at a particular price, the system will move to higher price levels in order to fulfill the order. 

This means that you will end up paying a lot more than you expected. The same thing happens in reverse when you are selling larger amounts. These prices can drop as soon as your order is filled. This effect is commonly known as slippage and will become a lot more noticeable as trade size starts to increase. 

The Challenges for Large Buyers

For someone that is dealing with a large amount of currency, avoiding sudden price changes can be very important. Large investors cannot always rely on doing regular exchanges because their orders can often disrupt the market. 

Instead of placing one large order publicly, what they often look for is ways in which they can complete trades more efficiently and quietly. This helps them to maintain much better control over their pricing and it reduces the risk that there will be unexpected losses. Managing this process properly can make a substantial difference in the final outcome of any trade. 

A different way to handle big trades 

To reduce the impact that large transactions have, some trades need to be handled outside of public exchanges.

In such cases, buyers and sellers will have to connect through the use of specialized services that will help them to arrange deals in a private manner. 

This approach allows both sides to agree on a price even before the transaction is completed. As a result, trade does not affect public markets in the very same way. This method is commonly referred to as crypto OTC, where large transactions can be completed directly between parties through the help of experienced intermediaries.

Why this helps the overall market

Handling very large trades carefully will benefit a lot more than only big investors. 

When large transactions are kept away from disrupting public exchanges, then the overall market will become much more stable for everyone involved. This means that everyday traders are a lot less likely to experience sudden price swings that are caused by doing a single large order.