What Is the Relationship between Pool Depth and the Potential for Slippage?

Pool depth, or total liquidity, is inversely related to the potential for slippage. A deeper pool has larger token reserves, meaning a single trade has a smaller proportional impact on the token ratio.

A smaller change in the ratio results in a smaller price movement and thus lower slippage for the trader. Shallow pools, conversely, experience high slippage even with moderate trades.