Liquidity

Liquidity refers to how easily and quickly an asset can be bought or sold in the market. This occurs without causing a significant change in its price. In trading, a highly liquid market—such as the Forex market—has many buyers and sellers, allowing trades to be executed almost instantly at stable prices.

Low liquidity, on the other hand, can lead to price slippage, wider spreads, and difficulty entering or exiting positions.

Browse through other terms in our Trader's Dictionary.