Trading Liquidity Signals
Liquidity refers to the ease with which an asset, or security, can be converted into ready cash without affecting its market price
Liquidity vs Liquidations
- Liquidations happen when traders face margin calls due to insufficient funds to keep their trades open. The broker will automatically sell the position. Huge losses are often seen. When this happens, liquidity flows into the market.
- Liquidity is an area where traders can accumulate/distribute large amounts of contracts/shares without affecting the price. Basically, everyone has the chance to buy or sell at a stable price point. It’s a pool of exchanges. Golden areas for institutions, they can execute large orders without exposing their strategies.