Liquidity
Liquidity is how easily you can trade without moving the price. Low liquidity makes prices noisy and weakens market-consensus benchmarks.
Definition
Liquidity is the ability to buy or sell without causing large price changes. In practical terms, it reflects how much volume is available near the current price.
Why it matters for consensus
When liquidity is high, market prices are usually more stable and a better proxy for market consensus. When liquidity is low, a single small trade can move price and distort implied probabilities.
Common indicators
• bid ask spread width
• order book depth near the top of book
• recent traded volume
Related
Liquidity is closely linked to thin market and to price proxies like mid price, VWAP, and last traded price.