# Automated Market Maker

*Crypto & Digital Assets — Finicade finance glossary*

An automated market maker prices trades with a formula against a pool of two assets instead of matching orders. The classic constant-product rule keeps the product of the two balances fixed, so each purchase raises the price of what you're buying. It was the innovation that made on-chain trading viable, and it means large trades move the price mechanically — the source of slippage on DEXs.

**Formula:** `x × y = k (pool balances multiply to a constant)`

**Also known as:** AMM, constant product formula, x*y=k

**Related terms:** [Liquidity Pool](https://finicade.com/glossary/liquidity-pool), [Decentralized Exchange (DEX)](https://finicade.com/glossary/decentralized-exchange), [Impermanent Loss](https://finicade.com/glossary/impermanent-loss), [Market Maker](https://finicade.com/glossary/market-maker), [Slippage](https://finicade.com/glossary/slippage)

Source: https://finicade.com/glossary/automated-market-maker