Liquidity

Liquidity describes how easily you can exit a position at a fair price. Highly liquid assets — like large-cap stocks or major ETFs — usually have tight spreads and lots of trading activity. Illiquid assets can be slower or more expensive to sell because fewer buyers and sellers show up.

For beginners, liquidity matters when sizing positions and choosing instruments: if you need flexibility, stick to widely traded securities. Thinly traded names can move sharply on small orders.