#TradingPairs101

Liquidity 101

Liquidity refers to how easily an asset can be bought or sold without significantly affecting its price. Key aspects:

1. *Market depth*: Number of buyers and sellers.

2. *Trading volume*: Frequency of transactions.

3. *Order book*: List of buy and sell orders.

High liquidity:

- Tighter bid-ask spreads

- Less price volatility

- Easier to enter/exit positions

Low liquidity:

- Wider bid-ask spreads

- Greater price volatility

- Harder to buy/sell

Understanding liquidity is crucial for traders and investors to manage risk and make informed decisions.