#Liquidity101

Liquidity measures how quickly and smoothly an asset can be traded without drastically moving its price. In highly liquid markets, trades are executed swiftly with minimal spread, while illiquid assets can experience slippage, where the execution price differs from what was intended. To assess liquidity before trading, analyze trading volume, order book depth, and bid-ask spread. To limit slippage, consider placing limit orders, steering clear of volatile periods, and dividing large trades into smaller ones. Being mindful of liquidity helps you enter and exit positions more efficiently and protects you from unexpected execution costs.