Liquidity Ratio: A Simple DEX Trading Trick

Today, let’s take a quick look at DEX trading and one powerful metric many traders ignore: Liquidity Ratio.
Liquidity Ratio helps you understand:
How safe a token is
How easy it is to dump
The risk of rug pulls and dev manipulation
Before entering any DEX trade, always check this first.
Liquidity Ratio Formula
Liquidity ÷ Market Cap × 100 = Liquidity Ratio (%)
Liquidity Ratio Levels
1️⃣ Healthy Liquidity Ratio (20% – 30%+) ✅
This is the safest range.
Example:
Market Cap: $200k
Liquidity: $50k
50k ÷ 200k × 100 = 25%
This token has strong liquidity and good price stability.
2️⃣ Decent Liquidity Ratio (10% – 20%) ✅
Moderate and acceptable.
Example:
Market Cap: $40k
Liquidity: $5k
5k ÷ 40k × 100 = 12.5%
Tradable, but always confirm the liquidity is properly burned.
3️⃣ Risky Liquidity Ratio (5% – 10%) ⚠️
High risk zone.
Example:
Market Cap: $1M
Liquidity: $60k
60k ÷ 1M × 100 = 6%
Dumping can happen fast. Enter only with caution.
4️⃣ Danger Liquidity Ratio (Below 5%) 🚫
Avoid this zone.
Example:
Market Cap: $1M
Liquidity: $40k
40k ÷ 1M × 100 = 4%
Extreme dump and rug risk.
Why Liquidity Ratio Matters
Helps you find better entries
Makes token analysis faster
Reduces rug pull risk
Protects you from massive dumps (-70% to -90%)
Next topic: Dump Potential how to spot tokens likely to dump before you enter.