Liquidity: Liquidity is how easily you can trade without moving the price much. A liquid market has many orders close to the current price.

What it means

Liquidity is how easily you can trade without moving the price much. A liquid market has many orders close to the current price.

Example

In a big election market you can often buy thousands of contracts within a cent of the last price. In a niche market, a few hundred dollars might move it by several cents.

Practical tip

Low liquidity isn't bad by itself, but size your trades to it and expect it to be harder to exit before settlement.