High liquidity vs Low liquidity: what's the difference?
How pool depth changes everything about a trade.
The short version
How pool depth changes everything about a trade.
- High liquidity: A deep pool where trades barely move the price.
- Low liquidity: A shallow pool where trades slip heavily.
Side by side
| Dimension | High liquidity | Low liquidity |
|---|---|---|
| Slippage | Low | High |
| Price impact | Small | Large |
| Rug risk | Lower (esp. if locked) | Higher |
| Position size | More room | Must stay tiny |
Which one should you care about?
Key idea — Depth determines your costs and risk. On low liquidity, keep size tiny — or skip; on high liquidity you have more room.
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