Liquidity

Liquidity refers to how easily an asset can be converted to cash without significantly impacting its market price. High liquidity means many buyers and sellers, tight bid-ask spreads, and the ability to execute large orders without moving the market. Liquid markets include major forex pairs, large-cap stocks, and popular ETFs. Low liquidity can result in slippage, wide spreads, and difficulty exiting positions. Traders prefer liquid markets for easier entry and exit, while some seek illiquid markets for potential inefficiencies. Liquidity often decreases during off-hours and increases during major market sessions.