#Liquidity101

Liquidity: This can simply be defined as the ease, fluidity, or dynamics with which an asset or commodity can be bought and sold without creating too much short term scarcity or abundance for a particular asset and thus impacting the normal price of the asset in an unusual and significant manner. Example is BNB or Binance coin

It can also be defined as how readily and efficiently an asset can be converted to cash without taking a significant loss on the asset value.

Some of the factors that influence liquidity on an asset may include:

-trading volume, as more volume means more liquidity.

-number of traders holding and trading a particular token. More holders and traders directly affects the rate of change or movement of an asset from sellers to buyers and vice versa, hence more liquidity.

-market depth, this simply means the amount of buyers and sellers of an asset at varying price levels. More and increasing buyers and sellers of an asset even as prices continue to change for an asset also means more and deeper liquidity.

Slippage: This could be defined as the difference between the expected price and the real price of n asset during a trading operation. This often results in loss of value for an asset when a trade occurs..

Slippage is often common when trading an asset with low liquidity and one of the ways to avoid significant losses as a result of slippage on low liquidity asset is to reduce Order Size and to buy or sell in smaller batches or dollar-cost-averaging in or out of a trade over a period of time.

Another way to reduce slippage on a trade is to buy or sell the asset during a spike in volume. This can be achieved by placing a Limit Order or Take-Profit Order on a target price.

So that's it for now.

And whatever it is you trade in the hours ahead, I hope there's enough liquidity!

Cheers!