Some of you may be thinking that it is “only” a trade if it can be liquidated for 5 cents. But I’m here to tell you, that’s not the case. This trade would be a significant one for me if I could liquidate it for $5.
A trade with you. If you want to trade for me, you must pay for it. If you can’t pay for it, I’ll never trade anything for you.
The problem is that there is a very high cost to doing even small trades, as well as the fact that you can get caught in a liquidity trap. There are many reasons why a trade may not be worth the effort, but the biggest one is that you would have to pay a very high “liquidity premium” to be able to sell the trade for 5. This is why I have been so insistent on getting liquidity for these trades.
The price of the trade is the volume of liquidity you want to obtain.
The trade price is the volume of liquidity you want to transfer back to a merchant that is willing to pay a higher price for your liquidity. But if you just buy the trade, you’re stuck in a liquidity trap because the price of your trade is the volume of liquidity you want to transfer back to the merchant that you’re willing to pay the higher price for.
The trade market is set to collapse in the near future, and I think it is important to be mindful of this. At the moment, I think most traders are too risk-averse to take the necessary steps to avoid this future collapse.
In fact, I think the trade market is set to collapse in the near future too, and I wouldnt mind that if it meant that this would be a good time to sell my liquidity. In the last few days I’ve seen traders who are willing to pay a 3- to 9-percent premium for liquidity. So I’m sure that the price of liquidity will rise over the coming weeks. But as always, its important to be mindful of this.
I am not saying that the trade market is perfect. But it does seem like liquidity is way too tight. Even with the recent stock market correction, we still seem to have a glut of liquidity. Traders have to get their liquidity from somewhere, and at the moment the way to do that is buy and sell on margin. The way to avoid this is to trade on margin to increase your position size.
I’ve been trading for almost three years. I don’t really know what I’m talking about when I say this, but I do know that people are now buying and selling on margin and not trading for the markets as they were meant to be. To quote a trader, “Liquidity is over extended”. If you want to trade your position size, then you should trade on margin.
This is what makes the biggest difference, and it applies to every trade you do. If you trade for a lot of reasons, then you could trade a lot of other reasons you want to.