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Trading and Investment Terms

Liquid

Liquidity refers to the ease with which an asset, or security, can be converted into ready cash without affecting its market price.

Market Liquidity

Accounting Liquidity 

 

  • Liquid markets have many available buyers and sellers.
  • Liquid market prices change in comparatively small increments.
  • Financial assets such as some markets in forex, futures, bonds, and stocks are liquid.
  • Markets for trading specialized physical goods such as luxury items or houses are not liquid.

Liquid markets are usually found in financial assets such as forex, futures, bonds, and stocks. Markets for high-priced tangible goods, such as luxury items, heavy industrial equipment, or houses are considered illiquid markets.

 

For example, on April 26, 2019, 8.4 million shares of Amazon.com (AMZN) traded on the NASDAQ.1

 

 Liquid as that sounds, it's not a drop in the bucket compared to Intel (INTC), which led the NASDAQ that day, with a volume of 72 million shares—or to Ford Motor, which led the New York Stock Exchange (NYSE) with a volume of 156 million shares, making it the most liquid stock in the U.S. that day.

 

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