#Liquidity101

Why is liquidity important?

This is particularly important when it comes to altcoin transactions. If you create a position in a currency with low liquidity, you may not be able to exit at your desired price – and be left hanging. That is why it is generally a better idea to trade assets with higher liquidity.

What happens if you try to execute a large order in a market with low liquidity? Slippage. It is the difference between the intended price and the point at which your transaction is executed. High slippage means that your transaction is executed at a very different price from what you intended. This usually happens because there are not enough orders in the order book that are close to the point where you intended to execute them. You can bypass it by using only limit orders, but then your orders may not be executed.