A market is said to be liquid if it has a large number of buyers and sellers and relatively low transaction costs. Depending on the asset being traded, many factors may contribute to market liquidity. A deal can be completed quickly and at a favorable price in a liquid market because there are many buyers and sellers, and the product being traded is standardized and in great demand. Despite daily variations in supply and demand, the difference between what a buyer wants to pay and what a seller will accept is typically quite minimal in a liquid market.
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