#Liquidity101

Liquidity refers to the ease with which an asset can be bought or sold without significantly affecting its price. Key aspects include:

- *Market Depth*: The volume of buy and sell orders at different price levels.

- *Trading Volume*: Higher volumes typically indicate greater liquidity.

- *Bid-Ask Spread*: Narrower spreads suggest higher liquidity.

- *Impact*: Liquid markets facilitate smoother transactions and more efficient price discovery.

- *Importance*: Crucial for traders and investors to ensure they can enter or exit positions quickly and at fair prices, minimizing transaction costs and risks [1].