Important Secrets Behind the World of Trading That Are Rarely Discussed.
What is Liquidity in Trading?
Simply put, liquidity is how easily an asset can be bought or sold without significantly disrupting the market price.
High Liquidity = Lots
Why is Liquidity Important?
Faster and Easier Transactions
You can buy or sell at any time without having to wait for long matching.
More Stable Prices
Assets with high liquidity tend not to
What Happens If Liquidity is Low?
Prices can change drastically just because of a small order
Big traders can “fry” prices
Difficult to get out of a position (trapped)
Transaction costs become more expensive.
Smart Tips to Avoid Liquidity Issues
Always check the trading volume and order book before buying tokens, especially in new projects.
Use limit orders, not market orders, in markets with liquidity.
Conclusion: Liquidity is the Breath of the Market
Without liquidity, markets can die. Prices don't move. Transaction stalled. And your money could get stuck.
On the other hand, a liquid market is a healthy market: dynamic, fair and efficient. Therefore, before you FOMO buy an asset just because it's "hype", check first: what's the liquidity like?