#Day99 : Understanding Market Liquidity and Its Impact on Trading
Market liquidity refers to how easily an asset can be bought or sold without causing significant price changes. In crypto, high liquidity means tight spreads, faster execution, and lower slippage — ideal for both short-term and long-term traders. Low liquidity, on the other hand, can lead to volatile price swings and unexpected losses, especially with large trades.
Liquidity is influenced by trading volume, exchange depth, and market participation. Major coins like BTC and ETH usually have high liquidity, while smaller altcoins may suffer from low volume and wide bid-ask spreads.
Smart traders always assess liquidity before entering a trade. Use order books and volume indicators to avoid traps in illiquid markets. Liquidity isn’t just a metric — it’s a key factor in your risk management strategy.
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