Below #看懂K线 continues to introduce related content on trading liquidity:

Four, Main Sources of Liquidity (Continued)

• Bid-ask spreads, such as the designated market makers (DMM) at the New York Stock Exchange providing liquidity for stocks.

2. High-Frequency Traders (HFTs)

◦ Using advanced algorithms and technology to quickly buy and sell assets, profiting from small price fluctuations while increasing market depth and liquidity, such as some quantitative hedge funds employing high-frequency trading strategies.

3. Large Financial Institutions and Investors

◦ Banks, mutual funds, pension funds, etc., conduct large-scale trades in the market, and their trading activities also provide a certain level of liquidity, but their trading decisions are usually based on long-term investment goals and market analysis.

Five, Factors Affecting Trading Liquidity

1. Number and Type of Market Participants

◦ The more participants and diverse types there are, the higher the market liquidity. For example, the foreign exchange market, due to the involvement of numerous banks, corporations, and individuals globally, has become one of the most liquid markets.

2. Characteristics of Assets

◦ Homogeneity of Assets: Standardized and homogeneous assets (such as gold futures contracts) have better liquidity due to ease of valuation and trading.

◦ Recognition and Popularity of Assets: Stocks of well-known companies (like Apple, Microsoft) typically have higher liquidity than those of lesser-known small companies.

3. Transparency of Market Information

◦ In markets where information is disclosed sufficiently and timely, investors can accurately assess asset values and are more willing to engage in trading, thereby enhancing liquidity, such as in securities markets where listed companies timely disclose financial reports as required.

4. Trading Mechanisms and Market Rules

◦ Trading Hours: Markets with longer trading hours (such as the global foreign exchange market, which trades almost 24 hours) have better liquidity.

◦ Price Limits: Appropriate price limits can stabilize the market, but excessive restrictions may suppress liquidity, such as the price limit system in A-shares.

Six, How to Measure Trading Liquidity?

1. Bid-Ask Spread Method

◦ Calculate the ratio of the bid-ask spread to the asset price; the smaller the ratio, the higher the liquidity. For example, if a stock's buy price is 10 yuan and the sell price is 10.05 yuan,