Liquidity is measured through three primary dimensions:

• Spreads: The difference between the highest bid and lowest ask. Tight spreads indicate a more liquid, efficient market where transactions occur closer to fair value.
• Depth: The cumulative volume of buy and sell orders on either side of the order book. Greater depth means larger orders can be executed without significant price impact.
• Resilience: The speed and price at which depth is replenished after orders are filled. Highly resilient liquidity restores order book depth quickly and at similar price levels, acting as a natural buffer against aggressive directional selling.

When evaluating your market maker, all three dimensions should be tracked. A market with tight spreads but shallow depth or low resilience is still fragile.