#Liquidity101 ### **#Liquidity101: Liquidity in Financial Markets (In Brief)**

**Liquidity** means the ease of buying or selling an asset (such as stocks, currencies, real estate) without significantly affecting its price.

#### **Key Concepts:**

1. **Liquid Assets**

- Assets that can be quickly converted to cash at a stable price (e.g., major currencies, large stocks like "Apple" or "Aramco").

- **Illiquid**: Difficult to sell quickly (e.g., real estate, small stocks).

2. **Liquidity Indicators:**

- **Trading Volume**: The higher it is, the greater the liquidity.

- **Bid-Ask Spread**: The narrower the spread, the greater the liquidity.

3. **Importance of Liquidity:**

- Reduces costs (lower spreads).

- Increases flexibility in entering or exiting trades.

- Reduces the risks of sharp fluctuations.

#### **Example:**

- **Liquid**: "Aramco" stock (millions of shares traded daily).

- **Illiquid**: A rare painting (it may take months to sell at the desired price).

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