> For the complete documentation index, see [llms.txt](https://docs.transit.finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.transit.finance/start-to-use/quick-start-guide/liquidity-and-price-sources.md).

# Liquidity & Price Sources

## Liquidity

Liquidity refers to the ability to buy or sell an asset quickly without causing significant price fluctuations.

* High Liquidity: Ample buy/sell orders, where large trades have little impact on price.
* Low Liquidity: Sparse buy/sell orders, where large trades may cause sharp price changes (greater slippage).
* Source: Liquidity primarily comes from pools on decentralized exchanges (DEXs) such as Uniswap, PancakeSwap, etc., contributed by liquidity providers in the form of token pairs.

## Price Sources

In aggregation trading, prices are not determined by a single exchange. Instead, they are derived by comparing multiple liquidity sources to identify the optimal result.

* On-chain Prices: Directly from DEX trading pairs and liquidity conditions.
* Aggregation Calculation: Aggregators compare prices and costs across multiple DEXs through routing algorithms, selecting the best path for execution.
* Dynamic Updates: Prices change in real time with on-chain transactions and liquidity, making quotes time-sensitive.

## Advantages of Aggregated DEXs

* Better Prices: Consolidates liquidity across platforms to reduce slippage caused by insufficient liquidity on a single exchange.
* Higher Fill Rate: Finds executable trading paths from multiple liquidity sources, lowering the chance of failed transactions.