Liquidity in the stock market refers to how easily a stock can be bought or sold without affecting its price. High liquidity ensures smooth transactions at stable prices.
For example, Reliance Industries is a highly liquid stock where investors can instantly buy or sell thousands of shares without impacting the price due to high trading volume.
To identify liquid stocks, check high daily trading volumes, tight bid-ask spreads & major index stocks, which often have high liquidity due to continuous market interest.
Liquidity ensures quick transactions, market efficiency, reduced trading costs, and investment flexibility, allowing smooth buying and selling without significant price changes.
Liquidity types in the stock market include market liquidity, accounting liquidity, asset liquidity, and funding liquidity, each impacting buying, selling, and financial stability.
Good liquidity for a stock means high daily trading volume with minimal price impact, a narrow bid-ask spread, and quick trade execution or near the quoted prices.