what is a liquid market 
a liquid market a one with many available buyers and sellers and comparatively low transaction costs the details of what makes a market liquid may vary depending on the asset being exchanged in a liquid market it is easy to execute a trade quickly and at a desirable price because there are numerous buyers and sellers and the product being exchanged is standardized and in high demand in a liquid market despite daily changes in supply and demand the spread between what the buyer wants to pay and what sellers will offer remains relatively small the opposite of a liquid market is called a thin market or an illiquid market thin markets may have considerably large spreads between the highest available buyer and the lowest available seller understanding liquid marketsliquid markets are usually found in financial assets such as forex futures bonds and stocks markets for high priced tangible goods such as luxury items heavy industrial equipment or houses are considered illiquid markets but even financial securities can also be thinly traded depending on a number of factors including the time of day the immediate conditions of a given market or the relative visibility of the asset the market for the stock of a fortune 500 company would be considered a liquid market but the market for a family owned restaurant would not the largest and most liquid market in the world is the forex market where foreign currencies are traded it is estimated that the daily trading volume in the currency market is over 7 5 trillion which is dominated by the u s dollar the markets for the euro yen pound swiss franc and canadian dollar are also highly liquid futures markets that trade on the major currencies and major stock market indexes are very liquid but futures markets that trade specialized grain or metals products may be much more thinly traded advantages of a liquid marketthe main advantage of a liquid market is that investments can be easily transferred into cash at a good rate and in a timely fashion for example if someone owns 100 000 in u s treasury bills and loses their job the money in these treasuries is easily accessible and the value is known because it is a liquid market however on the other hand real estate property is not so liquid because there may be a small number of buyers for a given house in a given timeframe it may take longer to sell the property the faster you need to sell it the lower the offer you will need to make to sell which means you will receive less money you get for it liquidity and volatilityone significant factor related to liquidity is volatility low liquidity a thinly traded market can generate high volatility when supply or demand changes rapidly conversely sustained high volatility could drive some investors away from a particular market whether it be correlation or causation a market that has less liquidity is likely to become more volatile with less interest any shift in prices is exasperated as participants have to cross wider spreads which in turn shifts prices further good examples are lightly traded commodity markets such as grains corn and wheat futures 