What is "Liquidity Risk" in Trading?

Liquidity risk is the threat faced by traders when they cannot quickly buy or sell an asset at the expected price due to insufficient liquidity in the market. In cryptocurrency trading, this risk is particularly high, as the volatility of digital assets and instability of certain exchanges can complicate order execution. When the market has low trading volume, a large order can significantly impact the price, causing unexpected losses. To minimize liquidity risks, it is important to analyze trading volumes and choose platforms with high liquidity, which will provide more favorable trading conditions.