#Liquidity101 Liquidity refers to the ability to buy or sell an asset quickly and at a stable price. It measures how easily an asset can be converted into cash without significantly affecting its market price. High liquidity assets, such as major currencies or stocks, can be traded rapidly with minimal price impact. Low liquidity assets, like some stocks or cryptocurrencies, may experience significant price swings when traded. Understanding liquidity is crucial for traders and investors to manage risk, determine trading costs, and make informed investment decisions. It directly impacts the ease of entering or exiting a position.