#Liquidity101 Liquidity refers to how easily an asset can be bought or sold without affecting its price. In trading, high liquidity means there are many buyers and sellers, allowing fast transactions with minimal price changes. Stocks of large companies usually have high liquidity, while rare assets or low-volume stocks may be harder to trade quickly. Liquidity is crucial because it affects how efficiently you can enter or exit a trade. In a highly liquid market, you can sell assets without big losses. Low liquidity can lead to slippage—getting a worse price than expected. Traders prefer liquid assets for speed and safety. Always check volume and bid-ask spreads to understand an asset’s liquidity before making a trade decision.