#Liquidity101 💧 Liquidity 101: Why It Matters in Trading

When you hear traders say “this token has low liquidity,” they’re not talking about water — they’re talking about how easily an asset can be bought or sold without affecting its price too much.

🧠 What Is Liquidity?

Liquidity refers to how quickly and easily you can trade an asset at its current market price.

An asset is liquid if there’s a lot of trading activity — meaning many buyers and sellers, and enough volume to fill orders quickly.

It’s illiquid if trading is slow, there are few orders, or big trades move the price a lot.

💸 Why Liquidity Matters

Tighter spreads: In high-liquidity markets, the difference between buy and sell prices (the spread) is small. That’s good for traders.

Faster execution: Orders fill quickly at expected prices.

Less slippage: You get the price you expect — no nasty surprises.

More stability: Prices are harder to manipulate when lots of people are trading.

⚠️ Low Liquidity = Risk

Large orders may only fill partially or at worse prices

Prices can be volatile and easily manipulated

It can be hard to exit a position quickly, especially in small-cap tokens

🧭 Pro Tip

Before trading any asset, check its liquidity — look at trading volume, order book depth, and how fast orders are filling.

Stick to highly liquid pairs if you’re new, especially in volatile markets.