What are liquids trades?

To understand liquid trades, let's define liquidity.

Liquidity refers to how easily you can sell an asset. Can you quickly turn that asset into cash?

Assets can include houses or even stocks.

Therefore, liquid trades are those stocks that you can buy and quickly sell without their price changing.

Let's say two stores are selling books. Store X sells old books, and Store Y has a mix of old and current reads. Store Y ends up selling more because it offers a variety.

Books in Store X stay on the shelves for years until their prices start going down. Therefore, Store X doesn't have good liquidity as it's not able to convert its assets into cash in good time.

Most of the time, a low-priced stock isn't liquid. If stocks aren't liquid, they are referred to as illiquid.

Aim for liquid trades as it means a stock has enough traders to keep it moving.