【#Trading Liquidity】Slippage of -10% taught me the first lesson of trading
I still remember when I first started playing DeFi, I bought a new coin using a DEX, thinking to myself, "Market order, one-click buy, how convenient!" As a result, in less than a second, when I saw the transaction price, my face turned green—almost 10% higher than what I originally saw!
At that moment, I truly understood what 'insufficient liquidity leads to slippage' means.
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📘 What is liquidity?
In simple terms: it's the 'depth of buy and sell in the market.'
When market liquidity is sufficient, the price you buy at will be very close to the quoted price you see; on the contrary, when liquidity is insufficient, your market order will hit high/low priced orders, resulting in slippage losses.
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📊 Three lessons I learned:
1️⃣ Always check the 'order book' and 'depth chart' before trading, especially when trading on DEX or with altcoins.
2️⃣ Avoid using market orders to open large positions in low liquidity coins.
3️⃣ Choose high trading volume coins on CEX to better ensure transaction quality.
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⚙ Useful evaluation methods:
• Check the 24h trading volume and the depth of trading pairs (at least over 1000 USDT for each of the 5 buy and sell orders is preferable).
• Make good use of Binance's liquidity indicators, such as transaction volume, price difference (Bid-Ask Spread), etc.
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📣 Interactive question: What was the worst slippage you ever encountered in percentage? Which coin do you think is most prone to liquidity traps?
