What Is Liquidity?

By Sam Swenson, CFA, CPA – Updated Feb 22, 2025 at 9:30 AM EST

Key Points

High trading volume and tight bid-ask spreads indicate a stock's high market liquidity.
Accounting liquidity measures a company's ability to cover short-term obligations.
Liquid stocks like Apple and Tesla allow quick, stable transaction execution.

An asset is considered liquid if it can be bought or sold quickly without affecting its price. An asset that can be sold rapidly for its full value is said to be highly liquid. An asset that takes significant time to sell, or one that can only be sold at a discounted value, is considered less liquid or illiquid.

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An infographic explaining what asset liquidity means. — Image source: The Motley Fool

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Volume in Stocks

Volume represents the number of shares traded during a defined period, typically a day.

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Data source: Trading View. Data current as of May 24, 2021.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Sam Swenson, CFA, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Microsoft, Nvidia, Starbucks, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.