#Liquidity101

What is Liquidity and How Does It Affect Price Execution?

Liquidity refers to how easily an asset can be bought or sold in a market without causing major changes in its price.

🔹 High Liquidity

Many buyers and sellers

Tight bid-ask spreads (small difference between buying and selling price)

High trading volume

✅ Trades are executed quickly and at prices close to what you expect.

🔹 Low Liquidity

Fewer market participants

Wider bid-ask spreads

Low trading volume

⚠️ Your trades may take longer, move the price, or fill at worse prices (more slippage).

How Liquidity Impacts Price Execution

In highly liquid markets, your orders are filled faster and more accurately, with minimal price difference.

In illiquid markets, you may:

Get partial fills

Move the market with large orders

Experience slippage, paying more (or selling for less) than expected