Understanding Liquidities
What is Liquidity?
In the simplest way possible, liquidity is a
measure of the ease of ability to enter and exit a market at the desired price
based on the number of buyers (bids) and sellers (asks/offers) in that market,
without creating a major impact on the same market.
The primary objectives of the market marker
in respect to liquidity are;
To make a market by buying and selling from
their own inventory, when public orders to buy or sell the assets are absent.
To keep the market book of orders,
consisting of limited orders to buy and sell, as well as stop orders placed by
the general market participants.
A financial asset is regarded as having a
high level of liquidity when you can easily buy or sell it, and there is a
significant amount of trading activity for that asset.
Generally, if you understand these two points, you will know how the big boys make fakeouts and induce retail traders to fake moves.
DISCLAIMER
Ideas & strategies shared in this
primer are intended as educational information only & are not intended as
investment advice. You can implement them while trading at your own risk.
