Trading & Markets
Liquidity
How much size can trade at or near the current price without moving it. Deep liquidity means tight spreads and clean fills; thin liquidity means slippage.
In plain English
Liquidity is the market's shock absorber: resting orders stacked through the book that let buyers and sellers transact at fair prices. ES and ZN are oceans; RTY afternoons and overnight micros are puddles by comparison.
Liquidity follows the clock, deepest at the US equity open and data releases, thinnest at rollover lulls and holidays. Prop traders treat it as a filter: the same strategy that works at the open can bleed slippage at lunch. The word also names the stop clusters that sweeps hunt, which is liquidity in its other sense: orders waiting to be taken.
- Selling 20 ES at the open moves the market one tick.
- The same order at 3am might walk four levels and telegraph the position.