#Liquidity101 Liquidity refers to how easily an asset can be bought or sold without significantly affecting its price. High liquidity means many buyers and sellers, tight bid-ask spreads, and minimal price impact. Low liquidity can lead to large price swings and difficulties executing trades. Market makers and high trading volumes contribute to liquidity. Understanding liquidity is crucial for traders and investors, as it affects the ease of entering or exiting positions. Illiquid assets may require larger price movements to realize gains, while liquid assets offer more flexibility. Assessing liquidity helps manage risk and optimize trading strategies. It's a key market factor.