Liquidity Routing

When traders open positions on Alpaca, the Alpaca Aggregator dynamically compares trading prices provided by various leveraged trading protocols. The Aggregator recommends an underlying protocol with the most suitable liquidity depth.

Why Liquidity Routing is Important

Leveraged trading comes with a composite factor known as the "trading cost." This factor includes price, spread, slippage, price impact, position fees, and other explicit trading costs. It also involves implicit costs such as max leverage, maintenance margin, liquidation fees, available liquidity, etc.

Alpaca Protocol's Approach to Liquidity Routing

The Alpaca protocol comprehensively compares the trading cost of the aggregated protocols. It selects the most suitable liquidity route and minimizes the composite cost for traders while meeting the needs of opening positions. This approach ensures that traders can optimize their trading strategies while minimizing costs and risks.