Liquidity refers to how easily and quickly an asset can be bought or sold in the market without affecting its price.
💧 In Trading Terms:
- High liquidity = lots of buyers and sellers, tight bid/ask spreads, fast execution.
- Low liquidity = fewer participants, wider spreads, slower fills, and more slippage.
📊 Examples:
Asset Type | Liquidity Level | Why? |
---|---|---|
Apple stock (AAPL) | High | Traded by millions daily |
Micro-cap penny stock | Low | Few buyers/sellers, volatile |
S&P 500 futures | High | Institutional volume, 24/7 market |
Exotic crypto token | Low | Thin volume, limited exchanges |
🧠Why It Matters for You:
- Tighter spreads mean better pricing.
- Faster fills reduce execution risk.
- More volume gives you flexibility to scale in/out.
Liquidity is your lens for spotting efficient markets. Want to explore how to scan for high-liquidity setups or build a screener for it?