Stock Liquidity Analysis Skill

Skill Overview

Stock Liquidity Analysis is a stock liquidity analysis skill based on Yahoo Finance data. It calculates a stock’s true trading costs across five dimensions—bid-ask spreads, volume distribution, order book depth proxies, market impact, and turnover—rather than simply looking at quoted prices.

Use Cases

1. Assessing how easy a stock is to trade: Before buying or selling an unfamiliar stock, run a liquidity check to review its average daily volume, dollar volume, and bid-ask spread, avoiding situations where you can buy but cannot sell.
2. Estimating the execution cost of large orders: Before placing an order for 100,000 shares or $1 million, use the square-root model to estimate how much the order may move the price and determine whether the order should be split or executed using an algorithm.
3. Comparing multiple stocks side by side: Compare liquidity between AAPL and TSLA, or between large-cap and small-cap stocks, using consistent metrics to identify which is easier to trade and has lower costs.

Core Features

1. Liquidity Dashboard: Calculates all key metrics at once—including the current spread (absolute value, percentage, and basis points), average and median daily volume, average daily dollar volume, volume coefficient of variation, the Amihud illiquidity measure, daily volatility, and estimated impact for an order equal to 1% of ADV—and provides a liquidity rating. Supports side-by-side comparisons of multiple stocks.
2. Spread, Volume, and Order Book Depth Proxies: Analyzes the bid-ask spread and quoted size, and reports ADTV, dollar volume, relative volume (RVOL), volume trends, and weekday distribution. It then uses intraday volume distribution from 5-minute candles and open interest and volume from the options chain to indirectly assess market depth.
3. Market Impact and Turnover Estimates: Uses the square-root market impact model commonly employed by institutions (Impact = σ × √(Q/V)) to estimate the price impact of a specified order size, and outputs a complete impact curve ranging from 0.1% to 50% of ADV. It also calculates daily turnover, annualized turnover, and the number of days required to trade the entire free float, helping determine whether trading activity is increasing or decreasing.

Frequently Asked Questions

How much price impact will a large order have?

The skill uses the square-root market impact model:

Impact = daily volatility × √(order size ÷ average daily volume)

For example, if a stock has daily volatility of 2% and your order represents 5% of average daily volume, the model estimates an impact of approximately 45 basis points. The skill provides an estimate based on your specific share count or dollar amount, along with a complete impact curve showing how costs rise nonlinearly as the order increases from 0.1% to 50% of ADV. Note that this is a model estimate, not a guarantee—the actual impact also depends on the execution strategy (such as VWAP or TWAP), the trading period, and prevailing market conditions. If the estimated impact exceeds 50 basis points, the order is relatively large compared with the stock’s liquidity. In such cases, algorithmic execution or building the position over several days is generally recommended.

Can this skill access Level 2 order book data?

No. Yahoo Finance only provides top-of-book quotes—the best bid and ask and their quoted sizes—not the complete depth at every price level in the Level 2 order book. The skill clearly reports this limitation and uses two alternatives to estimate depth: first, the intraday volume distribution at 5-minute intervals over the most recent five trading days, showing whether volume is concentrated at the open, close, or during the middle of the session; and second, total open interest and trading volume from options chains with the nearest expiration date, as a reference for derivatives-market depth. If you require complete order-by-order depth data, you will need a direct market-data feed such as NYSE OpenBook or NASDAQ TotalView.

Is the data real-time? Will there be delays?

Historical volume, turnover, and other metrics are based on daily data, with a default lookback period of three months. Quote-based data—such as bid-ask spreads and current quoted size—comes from Yahoo Finance. Most exchanges have approximately a 15-minute delay, so the displayed spread may not reflect the actual order book at that moment. Liquidity itself can also change rapidly: around earnings releases, trading halts, or pre-market and after-hours sessions, the liquidity of the same stock may differ substantially from that during regular trading hours. Check the data timestamp before making decisions.

Will it tell me directly whether I should buy the stock?

No, by design. This skill only outputs liquidity data and model estimates for research and educational purposes and does not constitute investment advice. It can tell you how costly a trade may be and how easy a stock is to enter or exit, but you must make the buy or sell decision yourself. In addition, the skill obtains data through the open-source library yfinance and has no affiliation with Yahoo.