> For the complete documentation index, see [llms.txt](https://docs.position.exchange/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.position.exchange/products/exchange/liquidity-pools.md). # Liquidity pools When you add your token to a Liquidity Pool you will receive Liquidity Provider (LP) tokens and share in the fees. ## LP Tokens As an example, if you deposited **POSI** and **BUSD** into a Liquidity Pool, you'd receive **POSI-BUSD LP** tokens. The number of LP tokens you receive represents your portion of the **POSI-BUSD** Liquidity Pool. You can also redeem your funds at any time by removing your liquidity. ![](/files/-MgUh-1-_AAEx4XzFIaN) ## Liquidity Providers earn trading fees Providing liquidity gives you a reward in the form of trading fees when people use your liquidity pool. Whenever someone trades on Position Exchange, the trader pays a 0.25% fee, **of which 0.17%** is added to the Liquidity Pool of the swap pair they traded on. For example: * There are 10 LP tokens representing 10 POSI and 10 BUSD tokens. * 1 LP token = 1 POSI + 1 BUSD. * Someone trades 10 POSI for 10 BUSD. * Someone else trades 10 BUSD for 10 POSI. * The POSI/BUSD liquidity pool now has 10.017 POSI and 10.017 BUSD. * Each LP token is now worth 1.00017 POSI + 1.00017 BUSD. To make being a liquidity provider even more worth your while, you can also put your LP tokens to work whipping up some fresh yield on the Position Exchange farms while still earning your 0.17% trading fee reward. ## Impermanent Loss Providing liquidity is not without risk, as you may be exposed to impermanent loss.\ [“Simply put, impermanent loss is the difference between holding tokens in an AMM and holding them in your wallet.” - Nate Hindman](https://blog.bancor.network/beginners-guide-to-getting-rekt-by-impermanent-loss-7c9510cb2f22) --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter: ``` GET https://docs.position.exchange/products/exchange/liquidity-pools.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.