#Liquidity101

Liquidity in cryptocurrency trading is the ability to quickly buy or sell an asset without significant changes in its price. High liquidity helps to avoid slippage, where the execution price of a trade differs from the expected price. Before entering a position, I assess liquidity by looking at trading volume and the spread between buy and sell prices. If the volume is high and the spread is small, it means liquidity is good. To reduce slippage, I use limit orders instead of market orders. This helps control the price at which I want to enter or exit a position. I also avoid large trades in illiquid markets to prevent sharp price fluctuations.