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Pro's and Con's of an Investment Item (stocks, Forex, Furtures) Being Highly Liquid

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I'm new to investing and I have a newby questions. What are the Pro's and Con's of an investment item (stocks, forex, furtures) being highly liquid? I here EUR/USD is highly liquid. Is that good or bad?

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I am strting trader myself, but as I understand it, more liquid means better. In liquid market you more easily buy or sell at the price you want, that means also lower slippage. In illiquid market you may have problems to enter or exit positions at price you like/accept. On the other hand, the most liquid markets are often traded with big companies using sophisticated automated systems, so it may lower amount of nice/valid signals. My advice is to find liquid market but not too liquid or choose from highly liquid markets one that you understand/read/feel comfortable with and your system works best on.

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I don't know anything about the EUR/USD, but being in a highly liquid market is best for new traders. If a the market starts to go against you, it is easier to close your positions in a market that has a lot of liquidity. If you are in a market without much liquidity, and then it moves against you, you may not be able to close out your position until you have taken a much greater loss than planned. It could even wipe you out and leave you with a debt in the futures market. Also, thinly traded futures markets can go limit up or down. If this happens and it it is limiting against you, then you stand to lose a lot of money.

 

I personally only trade the ES and have no interest in trading the thinner markets, until I have more experience and trading capital. Leave the thinly traded markets to those who are more sophisticated (ie those with lots of experience and proven themselves consistent winners elsewhere).

 

:2c:

 

Good trading.

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