Have you ever wondered what "liquidity" means in the trading world? 🤔
Liquidity is how easily and quickly an asset – like cryptocurrencies – can be converted into cash or another asset without significantly affecting the price.
🔹 When liquidity is high:
This means there are a large number of buyers and sellers, making the execution of trades quick and at prices close to the true market price. This reduces what is known as the "spread" (the difference between the bid and ask price).
🔹 In the case of low liquidity:
You may face difficulty selling or buying a currency at the desired price, and the trader may have to accept a much lower or higher price to execute the trade.
Liquidity is considered one of the important factors when choosing a trading platform or currency pair. For example, the ETH/USDT pair usually has high liquidity due to its popularity and large daily trading volume.
The higher the liquidity, the greater the market efficiency, and the lower the risks associated with execution. So, always make sure to review liquidity before entering any trade 🔍
