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The importance of liquidity in a market has to do with being able to sell/buy (aka trade) without the price moving. Enough volume can move the price, (aka create price action), regardless of the depth of liquidity since it is relative, enough volume can overcome insufficient liquidity. And liquidity in the form of limit orders is dynamic, it can be added or subtracted.
So markets move as a composite operator.
It relates to supply and demand, and the reasons of the market participants for their decisions.
The healthier the market, the more we can trust the price action.
Liquidity would be a characteristic of healthy market.
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