Liquidity
Volume Profile Analysis glossary · Profile Anatomy & Volume Nodes
Definition
The ease with which an instrument can be bought or sold without materially affecting its price. Measured by depth of book, spread, and volume.
Liquidity in plain English
Liquidity is simply how easily you can buy or sell something without shoving its price around. A crowded farmers' market where hundreds want your apples is liquid — you sell instantly at the going rate; a tiny town with two buyers is illiquid — dumping your apples there tanks the price. In trading, high liquidity means lots of resting buy and sell orders, a tiny gap between the best buy and sell price (the "spread"), and heavy volume, so your trade barely nudges anything. Low liquidity means even a modest order can swing the price hard against you.
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