# Liquidity

**Liquidity** is the ability to quickly buy or sell an asset at the current market price without significantly affecting that price.

High liquidity — easy to execute a trade. Low liquidity — trade is difficult or will execute at an unfavorable price.

***

### High Liquidity

**Signs:**

* Narrow spread
* Many orders in the order book
* Large trading volumes
* Fast order execution

**Advantages:**

* Quick buy/sell
* Price close to market
* Minimal slippage
* Easy to enter and exit

***

### Low Liquidity

**Signs:**

* Wide spread
* Few orders in the order book
* Small volumes
* Slow execution

**Problems:**

* Difficult to find a counterparty
* Execution at worse price
* High slippage
* Your trade affects the market

***

### How to Assess Liquidity

**By spread:**

Narrow spread = high liquidity

Wide spread = low liquidity

**By order book depth:**

Many orders = high liquidity

Few orders = low liquidity

**By trading volumes:**

High volumes = high liquidity

Low volumes = low liquidity

***

### When Liquidity Changes

**Trading time:**

Active hours — liquidity is maximum, spreads are narrow

Night, weekends — liquidity drops, spreads widen

**News:**

Before news — participants exit, liquidity drops

After news — participants return

**Volatility:**

High volatility — liquidity may decrease

Low volatility — stable liquidity

***

### How to Trade Considering Liquidity

#### On Highly Liquid Assets

* Any strategies suitable
* Scalping works well
* Can trade large volumes
* Suitable for beginners

#### On Low Liquidity Assets

**Recommendations:**

* Trade smaller volumes
* Use limit orders
* Increase stop-loss
* Avoid scalping

**Pre-entry check:**

1. Current spread — narrow or wide?
2. Order book depth — many orders?
3. Trading volumes — actively traded?
4. Time of day — active hours?

***

### Liquidity and Slippage

**Slippage** — difference between expected execution price and actual price.

**High liquidity → low slippage**

Many orders at levels, execution at expected price.

**Low liquidity → high slippage**

Few orders at levels, order "slips" to next levels, average price worse than expected.


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