1️⃣ What is liquidity? Why is it important?
It's like stocking a convenience store: Want to quickly sell 100 boxes of water? If the convenience store is packed every day (high liquidity), you can sell out at the marked price instantly. But if there are only two customers a day (low liquidity), you'll need to offer discounts to sell it, or it may sit in your hands.
In trading, it means:
High liquidity = many buyers and sellers → Your order gets filled in seconds, and the price hardly changes.
Low liquidity = few buyers and sellers.→ Prices can easily be 'pushed off' by you, leading to
✅Slippage:Want to buy Bitcoin for 10,000, but the execution price is 10,050 (Bought too expensively)
✅Transaction failure:An order hangs for a long time without anyone accepting it, especially during price crashes or surges!
2️⃣ Before placing an order, take 3 seconds to assess liquidity (a must to avoid pitfalls).
Check how thick the 'order wall' is.
Open the order book on the trading page (buy/sell order list).
Focus on: Are there many buy and sell orders near the current price?
Thick = Safe (large orders can be absorbed) Thin = Dangerous (prices break easily upon contact).
Check if the trading volume is sufficient.
Look for the 24-hour trading volume; the higher the number, the better (for example, Bitcoin > Dogecoin).
Beware of 'zombie coins': Don't touch those with only a few transactions a day!
Check how big the bid-ask spread is.
The gap between the buying price and the selling price is called the 'spread'.
Small gap (for example, only 1 dollar difference) → good liquidity, low cost.
Large gap (100 dollars difference) → poor liquidity, you lose money as soon as you buy.
📍 Simple mantra: Choose mainstream coins (BTC/ETH) and avoid off-peak hours (like midnight)!
3️⃣ Tips to minimize losses—reduce slippage with these three strategies.
Use 'limit orders' more, and 'market orders' less.
Market order = 'Quick! Buy at any price!' → You will definitely get ripped off when liquidity is poor.
Limit order = 'Don't buy if it exceeds 10,000!' → You control the price, but you might not be able to buy it.
Break large orders into smaller ones:
Want to sell 100 coins? Don't dump them all at once! Split it into 10 sales, each at a different price point (like casting a net to catch fish).
Avoid scaring off the market and sell more profitably.
Avoid 'stormy weather':
Breaking news, early morning, weekends → fewer market participants and greater volatility, a black hole for slippage!
Wait until there are more traders and the market is stable before making a move.
💡 In summary: Liquidity is the 'ease of cashing out'; the higher it is, the more money and hassle you save!
