#Liquidity101 Everything you need to know about liquidity in financial markets.

Liquidity is the ease with which an asset can be converted into cash without affecting its price. In liquid markets (like Forex or large stocks), there are more buyers and sellers, which reduces slippage and volatility. 📊

Why does it matter?

- Allows for quick entry/exit from trades.

- Reduces transaction costs.

- Avoids losses due to wide spreads.

🔹 Liquidity in crypto:

- Liquidity pools in DeFi (like Uniswap) use AMMs to facilitate trading.

- Risk: Impermanent Loss* if prices vary significantly.

🔹 How to measure it:

1. Trading volume (high = more liquid).

2. Bid-ask spread (the smaller, the better).

3. Order depth (large orders without moving the price).

💡 Tip: Avoid assets with low liquidity; you could get "stuck" in a position.