Liquidity
How easily you can enter or exit a position without moving the price. High liquidity = tight spreads, deep order books, fast fills.
Liquidity describes how quickly and cheaply you can convert an asset to cash without materially affecting its price. It is arguably the most practically important concept for active traders.
A liquid market has high trading volume, tight bid-ask spreads, and a deep order book — meaning there are plenty of buyers and sellers at every price level. You can enter and exit large positions without slippage.
Illiquid assets are harder to exit in a hurry. You may have to accept a worse price (slippage) or wait days for a fill. In a crisis, liquidity can evaporate suddenly — even previously liquid assets become illiquid when everyone tries to sell at once.
On the desk
The same contract that absorbs 40 contracts at midday may move several ticks on 8 contracts in a holiday session. Size that was ‘small’ at 10:00 can be large at 02:00.