#Liquidity101 Liquidity 101

Liquidity in financial markets refers to how easily an asset can be bought or sold without significantly affecting its price. High liquidity means there are many buyers and sellers, leading to quick transactions and tight bid-ask spreads. Think of highly liquid assets like major currencies or large-cap stocks.

Conversely, illiquid assets, like real estate or obscure small-cap stocks, are harder to sell quickly without offering a substantial discount. For traders, liquidity is paramount for efficient execution, lower transaction costs, and better risk management. It ensures you can enter and exit positions smoothly, minimizing the impact of your trades on market prices. Knowing an asset's liquidity is crucial for any trading strategy.