When mentioning liquidity in financial markets, take it on faith that one is not referring to beverage stocks like Coca Cola or Anheuser-Busch. When investing or trading in any market, liquidity levels (how easy it is to buy or sell in varying quantities) is a crucial factor for gauging risk.
When liquidity is shallow, the market is said to be thin, so purchasing or selling 100 shares may be negligible to the bid/ask spread, but a 1,000 share order might move it. A deep market, meaning liquidity is substantial, can easily absorb trades on either side of moderate to larger size. Securities that are ubiquitous, such as Microsoft or Apple, are considered to have deep markets, as opposed to some Pink Sheet companies, which may not even post daily trading. Most major currencies traded in Forex are deep market, although obscure currencies can experience greater volatility.
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Finance: What is a Liquid Market?17 Views
Finance allah shmoop What is liquid market Well it's one
that trades Ah lot High volume Lots of buyers Lots
of sellers Liquid lots of cash sloshing this way In
that way Go this way and that Did you ever
see a liquid market go this way and that That
little song Did you ever see a lassie Never mind
All right Weir Liquid markets Good Well because they implied
there's Lots of cash ready willing and able to be
put to work And that's usually a sign of a
healthy risk seeking active market versus risk averse one which
is you know hiding Ah liquid market means that investors
want to put their cash toe work that they have
actually saved cash along the way and or that they
have relatively easy access to credit And you can think
about it from the perspective of your kindly loving realtor
who wants a world where lots of people are buying
homes But in orderto have that happen you have to
have lots of people who are also selling homes at
the same time Otherwise prices just go higher and higher
with no supply to meet demand And at the end
of the day in real estate and it's in the
stock market while the most important thing yes that the
brokers get pays So that's a liquid market one that
trades a lot like it's Wet trading back and for
sloshing around not ice Where everything's you know all jammed 00:01:22.109 --> [endTime] up No needs heat or an animal or something