#Liquidity101
🔄 How important is liquidity when trading?
Much more than it seems. Liquidity can be the difference between a profitable trade… and an unnecessary loss. Let me explain why 👇
💧 What is liquidity?
Liquidity is the ease with which you can buy or sell an asset without significantly affecting its price. The more liquidity there is, the smoother the execution.
📌 Example: If you are buying Bitcoin and there are thousands of sell orders near the current price, your order executes instantly, and without surprises.
But if you trade a little-known token with low liquidity…
⚠️ You could end up buying much more expensively (slippage) or your order may not execute at all.
📊 How do I assess liquidity before entering?
✅ Daily trading volume: If an asset has low volume ($10,000 or less), I avoid it. I prefer assets with high volume (millions per day).
✅ Depth of the order book: I check how many orders are near the current price. If there are few buyers or sellers, that’s a bad sign.
✅ Tight spreads: If the difference between the buy and sell price (spread) is large, it indicates low liquidity.
🛡️ How do I reduce slippage?
1. I use limit orders, not market orders
➡️ This way I set the maximum price I am willing to pay or the minimum at which I want to sell. I avoid surprises.
2. I trade during high activity hours
➡️ During market openings or strong sessions like the U.S. or Europe, there is more volume.
3. I avoid assets with low volume or new projects
➡️ It doesn’t matter if they “promise 100x”. I prefer liquidity over promises.
4. I split large orders
➡️ If I am going to move a lot of capital, I do it in parts so as not to affect the market price.
📌 Final advice:
Do not underestimate liquidity. A bad entry or exit price can ruin a perfect trade on paper.$BTC
