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Liquidity

In one line: How easily you can buy or sell something quickly without moving its price much.

A liquid marketYou can trade easily without moving the price much. is like a big supermarket. There are lots of buyers and sellers, so you can get in and out fast at a fair price. An illiquid market is like selling a used sofa. You may have to wait, or take a worse price.

The SECThe US stock market regulator. describes liquidity as how quickly an investment can be turned into cash. In trading you also see it in the size of the Bid, ask and spread. And in how much the price slips on a Market order.

Liquidity is not fixed. It can dry up in fast markets and around big news. It can also dry up outside the main trading hours. (The Nasdaq notes that extended hours have lower liquidity and higher volatilityHow much and how fast the price swings..)

Related

Sources & studies

  1. Investor.gov (SEC): Liquidity (or marketability)
  2. Investor.gov (SEC): Investor Bulletin on stop, stop-limit and trailing stop orders
  3. Nasdaq: Stock market hours and holidays

Trading termsBid, ask and spreadSlippage

Last checked: 2026-11-04 · Educational, not financial advice.

Education only, not financial advice. No signals. Backtests are hypothetical: real trading can be worse. Past results don't predict future results.