The basics

Liquidity

Liquidity measures how easily you can buy or sell an asset quickly without moving its price.

A highly liquid asset trades in large volume with a tight spread: you get in and out easily. An illiquid asset is riskier: the price can jump and it is harder to exit at the right moment.

Example

A large S&P 500 stock is highly liquid; a tiny penny stock is far less so.

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