#Liquidity101

Liquidity refers to how easily an asset can be bought or sold in the market without affecting its price. Highly liquid assets, like major currencies or large-cap stocks, can be traded quickly with minimal price impact. In contrast, illiquid assets may take longer to sell and may require accepting a lower price. In trading, high liquidity typically means tighter spreads, faster execution, and lower risk of slippage. It is influenced by market participants, volume, and time of day. Understanding liquidity is crucial for risk management, especially during volatile news events when liquidity can suddenly dry up, causing sharp price movements.

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