Market mechanics · Rookie
Liquidity
What does Liquidity mean?
Liquidity describes how readily a market can absorb buying or selling without a substantial price change. It depends on available counterparties and quantities, not just recent activity.
Example
A larger order consumes several quoted price levels before it is fully filled.
Illustrative example; not a provider’s quoted offer.Why it matters for prop traders
Thin liquidity can increase execution costs and make displayed prices less representative of a full fill.
Sources and further reading
The following primary sources support the terminology. Provider rules describe their own products and may change.