Liquidity
The volume of orders available at each price level — deeper liquidity means smaller slippage and more reliable fills.
Liquidity is the density of buyers and sellers at each price. A deeply liquid market has thousands of contracts on the bid and offer at every nearby price level; a thin market has dozens. Liquidity determines how reliably your orders fill at expected prices.
For prop traders, liquidity matters because every trade has an entry, a stop, and (usually) a target — three transactions that can each be subject to slippage in a thin market. ES is the deepest US futures contract; NQ is deep but slightly less; energy and metals contracts (CL, GC) have less depth, especially outside RTH (regular trading hours).
Related terms
- Slippage
The difference between the price you expected to fill at and the price you actually got — usually worse than expected, especially in fast moves.
- Tick
The smallest allowable price increment for a given futures contract — and the unit most prop traders count P&L in.
- Market order
An order to buy or sell immediately at the best available price — guaranteed fill, no guarantee on price.