Liquidity
Liquidity is how quickly and easily an asset can be bought or sold at a fair price without strongly moving that price.
In stock markets, a liquid security is one that you can trade quickly in reasonable size without pushing the price much. Large, well-known stocks are usually very liquid: many shares trade every second, spreads are narrow, and even large orders are absorbed smoothly.
Illiquid securities are the opposite. Small companies, penny stocks and some foreign shares may trade only occasionally. Spreads are wide, and selling a large position might require accepting a much lower price or splitting the sale over days.
Common signs of liquidity are high average trading volume, tight bid-ask spreads and deep order books with many buy and sell orders near the current price. Liquidity can change quickly: in a market panic, even normally liquid assets can become harder to trade.
The term is also used for companies. A company's liquidity describes its ability to pay short-term obligations, measured with ratios such as the current ratio.
Example: selling 1,000 shares of a large-cap stock might move the price by a fraction of a cent, while selling 1,000 shares of a tiny stock could push it down several percent.