Liquidity:
- Liquidity refers to the ability to buy or sell an asset quickly and at a stable price.
- It affects price execution: high liquidity = tighter bid-ask spreads, lower slippage; low liquidity = wider spreads, higher slippage.
Evaluating Liquidity:
- Check trading volume and order book depth.
- Look for market makers and active traders.
- Monitor liquidity pools and trading activity.
Reducing Slippage:
- Use limit orders instead of market orders.
- Set realistic price targets and stop-losses.
- Trade during high-liquidity periods.
- Use slippage tolerance settings.
- Consider trading more liquid assets.