Liquidity is a term used to define the ability to sell or buy an asset without having a major impact on the market price. A market is considered liquid when traders or investors can immediately sell or buy a particular asset, meaning there is always a counterparty willing to trade.

Conversely, a market that is not considered liquid will require the trader to wait longer until his order is finally executed. This means that traders often look for liquid markets, so that they can buy and sell financial instruments in an efficient manner - without having to wait too long or accept unfair prices.

Therefore, a liquid market is one that presents a high volume of trading activity as well as a reasonable (not too large) spread between supply and demand orders.