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The importance of liquidityLiquidity is a very important aspect when it comes to order execution and safety. Liquidity has to do with the market depth. The more participants the easier it is to trade… Lets have a look at two examples: The stock window on the left (VV.VN) shows a very illiquid stock. This is a Canadian stock and the market makers are actually identified as numbers. I gave you the actual brokering house by numbers earlier in the course. So, here we see that there are very few market participants on every price level; these are called “thin levels”. In addition, these levels are very jumpy themselves. If you look at the ask side you will see, that there is only one house( #33 ) at $0.56 with 25000 shares and only 5 other bidders all the way to 60cents with a measly 255000 shares. When and if this stock releases good news this stock could climb as high as $1.00 in a few minutesgiven that when good news was released in the past the stock traded millions of shares! Problem is also the other way, on the bid there is not much support all the way down. Of course once a move starts, the MD has a tendency to fill up to slow down the rise/fall, but you get the drift… So, in a nutshell, the price can rise or fall rather fast because there are only few market participants supporting each price level. Also keep in mind, that if you trade a stock like this, your stop can sometimes become larger, even if you don’t want to; just because you are not able to get out at the price you want. I strongly advice beginners not to trade stocks like this… Penny stocks is a game that can pay big but you can also lose big, or simply end up with dead money for a long time since you can’t get out without affecting the stock price… Between news, stocks like this can trade 10000-20000 shares daily and create 10% swings one way or another… When the stock does move it moves very rapidly so if it doesn’t go your way your loss will likely be significant… If you decide to give it a go: Trade carefully! Speaking of penny stocks, I also used a penny stock to describe a rather liquid market depth. Like I said earlier penny stocks are more volatile but sometimes you find this kind of MD which allows for easier trading. So, as you can see, there are many market participants on every side of the market making entry and exit easy.
Go to the next chapter about spotting the "AX" 
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