#Liquidity101 Liquidity refers to how easily an asset can be bought or sold in the market without significantly affecting its price. In simple terms, it's a measure of how quickly you can turn something into cash.

Highly liquid assets—like stocks of large companies, government bonds, or cash—can be traded quickly with minimal price change. Illiquid assets—like real estate, collectibles, or small-cap stocks—take longer to sell and may require price discounts to attract buyers.

Liquidity is crucial in financial markets. High liquidity means tighter bid-ask spreads (the difference between buying and selling prices), lower transaction costs, and faster execution of trades. Low liquidity can lead to higher volatility and slippage, where you get a worse price than expected.

There are two types of liquidity to understand: market liquidity (how easily an asset trades) and account liquidity (how much cash or available margin you have to make trades).