#Liquidity101

Liquidity refers to the ability to buy or sell an asset quickly and at a stable price. In financial markets, liquidity is crucial for efficient trading. Key aspects of liquidity include:

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

- *Trading volume*: The amount of assets traded within a specific period.

- *Bid-ask spread*: The difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask).

High liquidity typically results in tighter bid-ask spreads, reducing trading costs and increasing market efficiency. Low liquidity can lead to increased volatility and trading risks.