‼️ Many people think that if a coin has a large trading volume, then buying and selling it is always easy. And that’s wrong..
Because the most important figure is sometimes (liquidity), not trading volume.
Liquidity means: can you buy or sell a large amount of the coin without the price moving strongly?
For example, a coin might have a daily trading volume of $100 million, but its liquidity is weak. If someone tries to sell a large amount, it will cause a clear drop in the price.
Whereas another coin with the same trading volume, but deeper liquidity, will allow you to enter and exit with large amounts with less impact on the price.
Liquidity means: how many real buyers and sellers are actually close to the coin’s current price.
So, for example, if you have a coin priced at $1, and it has strong liquidity, then in this case you can sell a large quantity close to the $1 price, because there are enough buy orders.
But if its liquidity is weak, you might start selling at $1, then be forced to sell the rest at $0.95, $0.90, and $0.80 because there aren’t enough buyers at the same price level you want.
That’s why a smart person doesn’t focus only on trading volume, but also asks about these things:
How much liquidity is there? Does the order book have good depth? Can I exit the trade easily if conditions change?
Entering at the right time matters, but your ability to exit the coin at the time you want is also a very important matter.
#BTC #ETH #creatorpad
Because the most important figure is sometimes (liquidity), not trading volume.
Liquidity means: can you buy or sell a large amount of the coin without the price moving strongly?
For example, a coin might have a daily trading volume of $100 million, but its liquidity is weak. If someone tries to sell a large amount, it will cause a clear drop in the price.
Whereas another coin with the same trading volume, but deeper liquidity, will allow you to enter and exit with large amounts with less impact on the price.
Liquidity means: how many real buyers and sellers are actually close to the coin’s current price.
So, for example, if you have a coin priced at $1, and it has strong liquidity, then in this case you can sell a large quantity close to the $1 price, because there are enough buy orders.
But if its liquidity is weak, you might start selling at $1, then be forced to sell the rest at $0.95, $0.90, and $0.80 because there aren’t enough buyers at the same price level you want.
That’s why a smart person doesn’t focus only on trading volume, but also asks about these things:
How much liquidity is there? Does the order book have good depth? Can I exit the trade easily if conditions change?
Entering at the right time matters, but your ability to exit the coin at the time you want is also a very important matter.
#BTC #ETH #creatorpad