what does a trader meant by liquidity and volatility
Liquidity is a relative term for how much of the instrument is available to buy. It can be temporary or permanent (inherent from the size of the instrument in question). Low liquidity is a problem - it means for example if you wish ed to buy 5,000 shares in a company but the broker can only obtain 2,000, your whole order will not be filled. It also means prices can be higher than normal, and/or spreads wider. Recognise that f you have 2,000 shares and you want to sell them, maybe the other people in the market are also worried about liquidity and they only want to take 1,000 off your hands.
Volatility is a measure of how much prices are moving in a given time range. Higher means high risk but high reward, lower means low risk but low reward. Use Average True Range to give this some objective measurement.
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Hi @Inyanggideon!
Tommor has given a great explanation of Market Liquidity and Volatility. But should you still have any questions on this, please feel free to check out this School of Pipsology’s lesson on Forex Market Size and Liquidity.
Hope this helps!
Penelopip
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