What Does Insufficient Liquidity For This Trade Mean?
Comprehensive Explanation of Insufficient Liquidity in Trading and How to Overcome It
By reading the article “How to solve insufficient liquidity for this trade error ” published in Adaas Investment Magazine, you will get acquainted with insufficient liquidity and its solutions in general.
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Insufficient liquidity for this trade error solutions
Insufficient liquidity is an error that some decentralized exchange users, especially the PancakeSwap decentralized exchange, encounter during some transactions, which is an obstacle for their transactions.
There are various solutions to the error of insufficient liquidity for this trade in decentralized exchanges, and in the following, we have explained to you the best methods to solve this problem.
It is better to get acquainted with the concept of liquidity in decentralized exchanges before studying the training so that you can understand the reason and nature of insufficient liquidity error.
What is liquidity?
Liquidity in different economies and financial markets is defined differently but by a specific concept. Liquidity is generally the amount of money or assets that can be traded in the market. This market can be a stock market or a cryptocurrency market.
Solve the problem of insufficient liquidity
As you have read, there are 3 solutions to this error that Adaas Investment Magazine has provided for you.
Exchange version change
One of the most successful methods to fix this error is to use other versions of exchanges. You may ask, how many versions does a decentralized exchange have?
For example, the PancakeSwap decentralized exchange is offered in version V1 (old version) and new version V2. To change the versions in the Swap section, a little lower than the main section, these options can be seen and used.
To make sure this method is able to solve the problem of insufficient liquidity for this trade, we can get help from CoinMarketCap.com. To do this, we enter the desired cryptocurrency profile and in the Markets section, we review the liquidity of the exchange offices.
As you can see in the image below, in the old version of the PancakeSwap exchange, the amount of liquidity is more than 5 times that of the new version. So this solution is applicable to trade this token.
Reduce the amount of purchases and break down transactions
Sometimes some cryptocurrencies can be bought in very small amounts of dollars because of their very low price. To solve this problem, we can reduce the number of assets we intend to trade and buy or sell the desired amount in a few transactions.
Price slippage tolerance increase
To trade cryptocurrencies in decentralized exchanges such as PancakeSwap, when faced with insufficient liquidity error, changing the price slippage to complete the transaction can be the solution.
Sometimes, due to excessive price fluctuations and the lengthy process of registering a buy or sell transaction in decentralized exchanges, an increase in price slippage helps to complete the transaction.
To do this, according to the image below, we click on the gear symbol in PancakeSwap DEX, then we try to change the price slippage tolerance and confirm it.
Other basis solutions
Other solutions, such as using high-speed Internet, using another mobile phone or another laptop, and even changing browsers application can sometimes solve the problem of insufficient liquidity for this trade. You can also share the solutions you have experienced in the comments section so that users can access their answers faster.
Also, the practical information that has been published for you below will make you more aware of the nature of this error.
Liquidity pool in cryptocurrency
One of the strategies to provide liquidity to users transactions is the liquidity pools in exchange offices. In this way, users submit their assets to exchange offices and receive transaction fees.
What is token stacking?
The process of acquiring digital assets by their owners in liquidity pools to receive transaction fees, is defined as stacking in the cryptocurrency world.
Providing liquidity in centralized exchanges
In centralized exchanges, such as Binance, exchanges provide transaction liquidity internally and in the display number system, and provide real liquidity when users’ assets are withdrawn.
It is good to know that central exchanges need to provide account tokens when users want to withdraw their cryptocurrencies from exchanges.
When trading in the spot market, as well as the futures market, centralized exchanges show users only the numbers and calculations based on trades and prices, and there is no provision of liquidity until the assets are withdrawn from the exchange.
Providing liquidity in decentralized exchanges
In decentralized exchanges such as PancakeSwap, the only way to ensure transaction liquidity is to use liquidity pools. In this way, some transactions face the problem of insufficient liquidity, because the liquidity pool of supply does not contain enough assets and the transaction is not done properly.
The end words
At Adaas Capital, we hope that by reading this article you will be fully immersed in insufficient liquidity for this trade error and its solutions. You can help us improve by sharing this article which is published in Adaas Investment Magazine and help optimize this article by submitting your comments.
FAQ
What is insufficient liquidity for this trade error?
In decentralized exchanges, some transactions face the problem of insufficient liquidity, because the liquidity pool of supply does not contain enough assets and the transaction is not done properly.
What Is the Liquidity?
Liquidity is generally the amount of money or assets that can be traded in the market. This market can be a stock market or a cryptocurrency market.
Merci pour votre explication. Cela éclaire un peu ma compréhension de ce que représente la Liquidité
Zephirin
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