#TradingPairs101 💧 What is liquidity?
It is the ability of an asset to be converted into cash quickly and without a significant loss in value.
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🔹 Types of liquidity:
1. Cash liquidity:
Ready cash in hand or bank accounts.
The highest degree of liquidity.
2. Asset liquidity:
The ease of selling assets (such as stocks, real estate) for cash.
The faster the asset sells and the less loss in value, the greater its liquidity.
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🔸 Examples:
Cash 💵: High liquidity.
Stocks 📈: Medium liquidity.
Real estate 🏠: Low liquidity (takes time to sell).
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⚖️ Why is liquidity important?
It helps individuals and businesses cover emergency expenses.
It means that the institution is able to meet its financial obligations in a timely manner..