#Liquidity101

#Liquidity101

Liquidity is key in trading and often does not receive the importance it deserves.

🔹 What is liquidity?

It is the ease with which an asset can be bought or sold in the market without significantly affecting its price. The more liquidity, the less slippage and better order execution.

🔹 How does price execution get affected?

In markets with low liquidity, a large order can move the price drastically, causing you to end up buying or selling at a worse price than expected. This is called slippage and it can eat into your profits.

🔹 How do I assess liquidity before entering?

I look at the daily trading volume of the asset.

I review the order book to see the depth: how many orders are close to the current price.

I prefer to trade in pairs with high liquidity, like BTC/USDT or ETH/USDT on CEX.

🔹 Strategies to reduce slippage:

Use limit orders instead of market orders.

Split large orders into several smaller ones.

Trade during times with higher volume.

Choose platforms with good liquidity or use DEX with large pools.

💡 Understanding liquidity helps you protect your capital and improve your results. Never underestimate this factor in your trading!