#Liquidity101 Liquidity refers to how easily an asset can be bought or sold in the market without affecting its price. High liquidity means there are many buyers and sellers, allowing for smooth and quick transactions. For example, major stocks like Apple or Bitcoin typically have high liquidity, while niche tokens or penny stocks may be harder to trade. Liquidity is vital because it reduces trading costs and slippage, making markets more efficient. In financial markets, both volume and market depth contribute to liquidity. Traders often prefer liquid assets for faster execution and more predictable pricing. Understanding liquidity is essential for managing risk, especially in fast-moving or volatile markets.