Market liquidity can be measured using various metrics:
1. Bid-Ask Spread: The difference between the buying price (bid) and the selling price (ask). A smaller spread typically indicates higher liquidity. 2. Trading Volume: The total number of shares or contracts traded within a specific period. Higher trading volumes usually signify higher liquidity. 3. Turnover Ratio: The proportion of the market or asset that is traded over a specific period. A higher turnover ratio indicates greater liquidity. 4. Market Depth: The ability of the market to absorb large orders without significantly affecting the price. Greater market depth usually means higher liquidity.