#Liquidity101
๐ง #Liquidity101 | What is liquidity in the trading world? ๐ค
Liquidity = The ease of buying or selling an asset without significantly affecting the price.
---
๐ Why is liquidity important?
โ Faster order execution
โ Lower spreads
โ Less price volatility
โ More stable trading experience
---
๐ข High liquidity market:
A large number of buyers and sellers
Trades executed quickly at a fair price
๐ด Low liquidity market:
Difficulty in executing large trades
Wider price spreads
Sudden fluctuations
---
๐ก Simple example: Buying BTC for $1000 in a high liquidity market = quick execution and a price close to the market.
In a low liquidity market? You might wait or get an unfavorable price.
