Liquidity is a description of the degree to which an asset, security or contract can be quickly bought or sold in the market without affecting the asset’s price.
Market liquidity is measured against how quickly an individual or firm can buy or sell an asset with a minimal effect asset’s price.
Liquidity is about the speed of the transaction and the agreed upon price. In a liquid market, the trade-off is mild: selling quickly will not reduce the price much.
In a relatively illiquid market, selling it quickly will require discounting or cutting price to attract a buyer.
