How to Fix "Insufficient Liquidity For This Trade"?

Sep 20, 2023 | Peter Wind

--:--

The basics of AMMs

Decentralized exchanges like Uniswap and PancakeSwap are based on an AMM (automated market maker) model, where users deposit tokens to create liquidity pools. Most commonly, each liquidity pool consists of two tokens, for example ETH and USDC. You can use an ETH/USDC pool to swap ETH for USDC and vice versa.

The prices of the tokens in a liquidity pool are determined automatically based on the relative amounts of the tokens held by the pool. Let’s imagine a liquidity pool containing 1,000 USDC coins and 10 ETH. If you want to get 1 ETH from this pool, it would cost you 100 USDC, plus a small transaction fee.

You can’t use a liquidity pool to make a trade that’s larger than the pool’s capacity. This is the root cause of “insufficient liquidity for this trade” errors. If you are using popular liquidity pools such as USDC/ETH or WBTC/ETH, you’re very likely to never encounter this error. Most often, this error is encountered by users who are trying to trade new tokens that have weak liquidity.

How to fix the “insufficient liquidity for this trade” error on Uniswap?

Uniswap’s “insufficient liquidity for this trade” error means that you’re trying to make a token swap that’s too big for the liquidity pool to support. Most often, this error occurs when users try to make token swaps using pools that have very low liquidity.

1. Reduce the trade size

The most straightforward way to fix this error is to simply reduce your trade size. You will likely have to reduce the trade size significantly to avoid losing too much value to slippage.

2. Increase your slippage tolerance setting

Another reason why the trade is failing to execute could be your slippage tolerance settings. Slippage is the difference between the expected price and the price the trade actually executes at. The higher the slippage, the worse deal you’re getting. Try increasing the slippage tolerance slightly, although you should be careful when making such adjustments.

If you’re using the Uniswap app, go to the settings and select the “Custom” option under “Max slippage”. Then, you will be able to adjust the maximum permitted slippage according to your needs.

3. Check if you are trading the correct token

Another reason for the error is that you might be trying to trade a token that has a similar name to the token that you actually want. Double-check the token’s contract address to ensure that you are trading the right token.

4. Check the token’s liquidity on other DEXes

It’s possible that another decentralized exchange has better liquidity for this token. There’s quite a few Uniswap alternatives on the market today, and they might have better liquidity for certain tokens.

5. Consider trading other tokens instead

If there are no other liquidity pools with better liquidity for the token you’re trying to trade, we recommend you avoid trading this specific token. Buying tokens that have extremely low liquidity is a recipe for disaster, as you might not be able to sell them later on.

If you want to fix PancakeSwap’s “insufficient liquidity for this trade” error, you can apply exactly the same tips as you would on Uniswap, because PancakeSwap is a fork of Uniswap with some minor modifications.

The bottom line

Trading tokens that have poor liquidity has many pitfalls, and the “insufficient liquidity for this trade” error is just one of them. While you can avoid this error by reducing the size of your trade or accepting higher slippage, you should probably avoid trading tokens that are illiquid enough for the insufficient liquidity error to be an issue.

If you are interested on becoming a liquidity provider on Uniswap, we provide some helpful tips on how you can get started with Uniswap staking.

FAQs