Overcoming-Impermanent-loss.mp4

To break down two ways to achieve profit:

Method 1

You simply earn more in fees than you lost due to divergent, or impermanent loss.

These losses are inevitable due to the nature of providing liquidity. It's all about getting enough in fees to offset this plus earn profit.

To accomplish this you need to keep in mind some factors when selecting something to LP.

• Is there enough volume, or trades on the market to make it worth it? Volume can come and go depending on the time of day, when most traders are active. This can be impacted by many things, weekends, holidays, market conditions and so on.
• The amount of liquidity in the pool, or TVL. When there is plenty of liquidity in a pool, it increases the chance of trades being routed through that pool. If a pool has low TVL, it won't get much, even if the market is hot and there is a lot of trading volume.
• Volatility, which again, is the frequency of the the token going up and down in price. The more a token moves back and forth, the better for you. You earn more fees and the higher dynamic fees may go.

Method 2

Positive divergent loss is fairly simple and what most LP'ers eventually hope for when providing liquidity for two tokens where they wish to eventually only hold one of them. Such as SOL and some meme coin for example. You don't really want to keep the meme, you'd rather have the SOL.

If the price of the meme pumps up beyond your range, you will be left with all SOL and you should be in profit. Plus you have earned fees along the way!

As you can see in the example, all of the meme coin was sold for SOL when the price pumped up beyond our range. Regardless of how many fees you have earned here, you are in profit!