👉 Market fluidity refers to how easily and quickly assets can be bought or sold in a financial market without causing significant price movements. Highly liquid markets allow traders to enter and exit positions with minimal impact on the asset's price, making them attractive for both retail and institutional investors. Factors influencing market fluidity include the size of the market, the number of active participants, the depth of trading (the volume of orders at different price levels), and the efficiency of price discovery mechanisms. In highly liquid markets, prices tend to reflect all available information rapidly, leading to tighter bid-ask spreads and lower transaction costs. Conversely, less liquid markets may experience larger price swings with smaller trades, making them riskier for investors.
