#Liquidity101

Liquidity refers to how easily an asset can be bought or sold without significantly affecting its price. In high-liquidity markets, there’s a healthy volume of buyers and sellers, which means trades are executed quickly and at predictable prices. But in low-liquidity markets, even a modest trade can move the price significantly, leading to slippage—where you end up buying higher or selling lower than intended. This becomes especially risky during volatile periods, when spreads widen and order books thin out. I’ve had trades on smaller altcoins where just entering a position pushed the price against me—lesson learned.

🛠️ Before I enter a trade, I always check the 24h volume, order book depth, and spread. On centralized exchanges, a tight bid-ask spread and deep order book are signs of strong liquidity. On DEXs, I look at the size of the liquidity pool and past trading activity. To reduce slippage, I usually break large trades into smaller chunks, especially on low-cap assets, or use limit orders to avoid chasing prices. Tools like slippage tolerance settings on DEXs also help—but they’re not foolproof. At the end of the day, liquidity isn't just a number—it’s a key part of your execution strategy that can make or break your trade, especially in fast-moving markets.