💧 What is liquidity? And why it can ruin (or improve) your trade 💸
Few understand liquidity, and that can make you lose money even if you're right about the market direction.
Here I explain the basics and how to avoid costly mistakes 👇
🔍 What is liquidity?
It is how easy and quick you can buy or sell an asset without affecting its price too much.
✅ High liquidity = many available orders = quick and accurate execution.
❌ Low liquidity = few buyers/sellers = worse entry, with more slippage.
📉 How does slippage affect me?
Example:
You see that $ARB is at $1.00, you make a market order to buy 100 tokens.
But there are only 50 at $1.00, the other 50 are at $1.02.
➡️ Result: you bought on average at $1.01.
👉 That $0.01 is called slippage: you paid more than expected due to low liquidity.
🧠 How do I evaluate liquidity before entering?
📊 I check the daily volume and the spread (difference between buy and sell).
🧾 I look at the order book: if there are large gaps, I stay away.
⛔ I avoid tokens with low volume or very new during low activity hours.
🎯 Strategies to avoid slippage:
- Use limit orders, not market orders (this way you control the exact price).
- Split large entries into several smaller ones.
- Trade in pairs with high liquidity (like $ETH , $SOL ).
- Avoid entering right at the opening of large candles or important news.
📌 Conclusion:
Liquidity is not visible on the chart, but it is as important as any indicator.
👉 Evaluate well before entering or your trade could end up costly even if you were right.
Do you check liquidity before trading? Have you lost due to slippage?
Tell me in the comments! 👇
