Glossary
Liquidity: definition
Liquidity is how easily you can turn a holding into cash, or cash into a holding, near the price you see. It is not the same as a long list of buyers in a marketing document.
In practice
Tight spreads and deep size are liquid. A quoted price with no size is a suggestion. Liquidity changes by hour, by news and by stress, and it often disappears together across similar assets when everyone wants out. Private funds and crowdfunding projects can be illiquid by contract: there is no market, not merely a wide one. A daily price is not liquidity if redemptions are gated.
A worked example
A large ETF in the main session is usually liquid. The same ETF at a halt in its underlying stocks can trade far from asset value. A private-equity stake has no bid at all until the manager distributes cash or you find a secondary buyer.
Related
Sources and review
Last reviewed: 2026-10-13. Next review due 2027-04-13. Status: editorial review of this page, not a live verification of every third-party fee.
Author: WiT Markets Editorial, Editorial desk. The WiT Markets editorial desk writes explanatory pages, comparison context and research notes. It separates sourced facts from items that are not confirmed, and it does not provide personal recommendations.
Reviewed by: WiT Markets Research Review.
Primary and regulatory sources
- Bank for International Settlements — checked 2026-10-13
- Investor.gov — checked 2026-10-13