#Liquidity101

Liquidity is the market's ability to absorb large orders without significant price changes. It depends on the number of participants, trading volumes, and the available buy and sell orders.

How to assess liquidity before entering a position?

1️⃣ Trading volume – a high volume means that the asset is in demand, and its price changes smoothly.

2️⃣ The spread between the bid and ask – a narrow spread signals high liquidity.

3️⃣ Market depth – analyzing the order book shows how quickly a large order can be executed without a significant price movement.

4️⃣ Timeframe – liquidity varies depending on the time of day and market conditions.