#Liquidity101 Liquidity is the ability to buy or sell an asset quickly without significantly affecting its price.

The higher the liquidity, the easier and less costly it is to enter and exit trades.

Types of liquidity:

1. High liquidity:

There are many buy and sell orders available in the order book.

The price difference between buying and selling (Spread) is narrow.

Execution is fast.

There is less risk when entering or exiting a trade.

2. Low liquidity:

There are few orders available in the market.

The difference between the buying and selling price is wide.

It is hard to execute large quantities without moving the price.

Greater risk, especially during volatile times.

Why does liquidity matter?

Efficient execution: It facilitates entering and exiting the market at a suitable price.

Identifying opportunities: Low liquidity may present an opportunity, but it requires precise risk management.

Technical analysis: Technical indicators are more accurate in high liquidity markets.

If you are trading in a low liquidity market, every wrong decision can cost you a lot. Choose assets with large volume, and monitor the order book before taking any action.