What Is Liquidity?
Liquidity broadly describes how easily an asset can be bought or sold without causing a significant price impact.
Highly liquid markets generally have many participants and high trading activity.
Why Traders Care
Liquidity can influence:
- Spread
- Execution
- Slippage
- Volatility
Liquidity can change throughout the day.
This is one reason some trading sessions are more active than others.
Important
Liquidity is a more advanced subject than it may initially appear.
Don’t fall into the trap of believing that every obvious high or low is simply a “liquidity grab.”
Learn the basic concept first.
Disclaimer
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
