An asset or security's liquidity refers to the ease and efficiency with which it can be converted into cash immediately without affecting its market price. Most assets are liquid, with the exception of cash, which is not liquid at all. Liquidity is the ability of an object to be bought or sold in the market at a price that accurately represents its true value. In general, cash is considered to be the most liquid asset due to its ability to be traded swiftly and easily. Illiquid assets include real estate, fine art, and collectibles, for example.

Liquidity is generally defined as the ability to pay back what you owe, when you owe it. Liquidity can be measured by gauging how quickly an asset can be converted into cash, the more liquid an asset is, the faster it can be converted into cash or used for other purposes. This measurement of liquidity takes into account risk of the asset and time to convert it.

Liquidity is the ability to convert an asset into cash easily. Liquid assets are easy to sell at any time with little consequence in terms of price. Assets that are not liquid are difficult to turn into cash for, and are typically sold at a lower price compared to what they are worth. The more liquid an asset is, the more valuable it is.

The level of liquidity is how easy it is to convert an asset back into cash. The price at which it is sold should be as close to its market value. Naturally the most liquid of all is cash itself, but there are also other assets which are considered to be quite liquid such as stocks and bonds. The least liquid include real estate and collectibles.

Liquidity is key to trading, and we need to identify liquidity zones in every asset class that we trade.