Liquidity
Liquidity is how easily something can be bought or sold quickly without moving its price much.
Cash is the most liquid asset. Large-company stocks are highly liquid; houses and small, rarely traded stocks are not. Illiquid assets have wider spreads and more slippage.
Related terms
- Bid-ask spread: The bid is the highest price a buyer will pay right now, the ask is the lowest price a seller will accept, and the spread is the gap between them.
- Slippage: Slippage is the difference between the price you expected and the price you actually got on a trade.
- Automated market maker (AMM): An automated market maker is a pricing formula that always quotes a price to buy or sell, instead of matching buyers with sellers in an order book.
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