Trading & Markets

Liquidity

The ability to trade size quickly without moving the price much.

Not the same as volume. An instrument with high volume but a thin book can be illiquid in the way that matters. The practical measures are spread width, depth at the touch, and how quickly the book refills after a trade.

Liquidity is conditional. It is abundant when nobody needs it and vanishes when everyone does, which is precisely the failure mode behind forced-liquidation spirals.

Market makers are paid to supply immediacy, and the spread is that payment.

Full guide

Liquidity and Market Impact

Why a large order costs more than a small one, the square-root law, and what liquidity actually means.

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