Liquid Market

AAA

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."

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Liquidity

    1. The degree to which an asset or security can be bought or ...
  2. Market-On-Close Order - MOC

    A non-limit (market) order executed as close to the end of the ...
  3. Volatility

    1. A statistical measure of the dispersion of returns for a given ...
  4. Volume

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

    A market with a low number of buyers and sellers. Since few transactions ...
  6. Spread

    1. The difference between the bid and the ask price of a security ...
Related Articles
  1. A Look At Primary And Secondary Markets
    Investing Basics

    A Look At Primary And Secondary Markets

  2. Understanding Liquidity Risk
    Active Trading

    Understanding Liquidity Risk

  3. Understanding Financial Liquidity
    Options & Futures

    Understanding Financial Liquidity

  4. ETF Liquidity: Why It Matters
    Mutual Funds & ETFs

    ETF Liquidity: Why It Matters

Hot Definitions
  1. Return On Sales - ROS

    A ratio widely used to evaluate a company's operational efficiency. ROS is also known as a firm's "operating profit margin". ...
  2. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  3. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  4. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  5. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  6. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
Trading Center