Liquid Market


DEFINITION of 'Liquid Market'

A market with many bid and ask offers, low spreads and low volatility. In a liquid market, it is easy to execute a trade quickly and at a desirable price because there are numerous buyers and sellers. In a liquid market, changes in supply and demand have a relatively small impact on price. The opposite of a liquid market is called a "thin market" or an "illiquid market."

BREAKING DOWN 'Liquid Market'

The market for the stock of a Fortune 500 company would be considered a liquid market, but the market for a family-owned restaurant would not. The largest and most liquid market in the world is the forex market, where foreign currencies are traded. The U.S. dollar is the most liquid currency in this market. Nearly every central bank and institutional investor in the world holds U.S. dollars, and some foreign countries use it as an official or unofficial alternative to their local currencies or as an exchange-rate peg. The markets for the euro, yen, pound, franc and Canadian dollar are also highly liquid.

  1. Liquidity

    The degree to which an asset or security can be quickly bought ...
  2. Spread

    1. The difference between the bid and the ask price of a security ...
  3. Thin Market

    A market with a low number of buyers and sellers. Since few transactions ...
  4. Volume

    The number of shares or contracts traded in a security or an ...
  5. Volatility

    1. A statistical measure of the dispersion of returns for a given ...
  6. Market-On-Close Order - MOC

    A non-limit (market) order executed as close to the end of the ...
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  3. Is scalping a viable forex trading strategy?

    Scalping in the forex market involves trading currencies based on a set of real-time analysis. The purpose of scalping is ... Read Full Answer >>
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