Understanding Liquidity: #Liquidity101

Liquidity is the ability to quickly buy or sell an asset without significantly affecting its price. In financial markets, liquidity plays a core role, ensuring that transactions occur smoothly and efficiently. A market with high liquidity typically has large trading volumes and narrow bid-ask spreads, making it easier for investors to enter or exit.

For example, the stocks of large companies often have high liquidity, while assets such as real estate may be harder to trade due to low liquidity. Liquidity not only affects individual investors but also impacts the stability of the entire market. To improve liquidity, exchanges often employ advanced technology and encourage participation from multiple parties. Understanding liquidity helps you make smarter investment decisions!