#Liquidity101

The Basics

Liquidity refers to how easily an asset can be converted into cash without affecting its price. High liquidity means quick, low-cost transactions (e.g., stocks, forex). Low liquidity can lead to delays or price swings (e.g., real estate, small-cap stocks).

**Why it matters:**

- **Markets:** Liquid markets attract more participants, ensuring smoother trading.

- **Investors:** Impacts entry/exit speed and execution prices.

- **Businesses:** Ensures ability to meet short-term obligations (cash flow vs. liabilities).

**Key metrics:** Bid-ask spreads, trading volume, and market depth.

Liquidity = Financial flexibility. 💡 #Finance #Trading #Investing