Learn why thin markets move violently and how to avoid traps.
Definition
Volume is how much traded. Liquidity is how easily you can trade without moving price too much.
Why liquidity is the hidden risk
In thin markets, small orders move price a lot. Exits become painful. Slippage rises. Stop losses can fill worse than expected.
How to spot low liquidity
- Wide bid ask spread.
- Empty order book.
- Big price jumps from small trades.
Practical tip
If you cannot exit smoothly, you do not have a position. You have a problem.
Volume confirmation
High volume on a breakout can confirm participation. Low volume breakouts often fail. Use volume as context, not as a single signal.
Warning
Low liquidity and leverage together is a fast route to liquidation.
Quick quiz
- Define liquidity.
- Name one sign of weak liquidity.
- Why does slippage matter?