Rebalance

Why it is important to balance your position

Rebalancing your position in a concentrated liquidity Automated Market Maker (AMM) is crucial for optimizing investment returns and minimizing risk. In a concentrated liquidity AMM, liquidity is provided within specific price ranges, making positions more susceptible to market volatility and price movements. Without regular rebalancing, your investment might become less effective as the market moves out of your chosen price range, leading to a phenomenon known as "impermanent loss" (IL). By actively managing and rebalancing your position, you ensure that your capital is allocated efficiently, maximizing yield opportunities and staying aligned with current market conditions.

Furthermore, rebalancing allows liquidity providers to adjust their risk exposure and capture fees from trades occurring within their specified price ranges.

In essence, constant rebalancing is a dynamic strategy that adapts to market shifts, enhancing the potential for profit while mitigating risks in the fast-paced environment of DeFi platforms. However, it is important to take into consideration the transaction gas cost, swaps gas impact and IL.

At mySwap, we've introduced a one-click Rebalance button that lets you adjust your position to the current price within the same range as your original setup. This feature not only saves on gas—by consolidating liquidity removal, swapping, and addition into a single transaction—but also retains your original NFT and eliminates the need for manually performing these three operations and their associated calculations.

The Rebalance button is located in the top right corner of your position card under the Pools tab in the mySwap CL dApp.