#Liquidity101

Liquidity is the ability to convert assets into cash quickly and with minimal loss in value, and it is an important factor in the decisions of investors and traders. Highly liquid assets provide faster execution and more stable prices, while low liquidity assets may be subject to sharp fluctuations.

How to Measure Liquidity Liquidity can be assessed through daily trading volume, bid-ask spreads, and liquidity indicators such as the quick ratio.

Examples of liquidity include major stocks like Apple, cryptocurrencies like Bitcoin which have high liquidity, compared to assets like real estate that are difficult to convert to cash quickly.

Tips for Investors It is essential to test market liquidity before entering large trades and to avoid low liquidity assets if the goal is trading flexibility.

Conclusion Understanding liquidity helps investors make smarter financial decisions and avoid risks arising from a lack of liquidity.