Liquidity is a per-name property

Every prior track dealt in a handful of instruments, each deeply liquid. Equities is thousands of names on one exchange, and the single word 'shares' spans a liquidity range of roughly a hundredfold. This lesson installs the tiers.

The range, honestly

• Megacaps: spreads of a few hundredths of a percent, depth that absorbs retail size without noticing, continuous genuine two-way flow. The earlier tracks' liquidity assumptions hold.
• Mid-caps: spreads of tenths of a percent, depth that notices size; fine for most retail purposes, priced accordingly.
• Small and micro-caps: spreads of whole percents, books that are sometimes one market maker's obligation, and days where a name simply does not trade. The earlier tracks' assumptions fail entirely.

What the tier decides before anything else does

The spread is a round-trip cost paid at entry, so a 3% small-cap spread means the position starts 3% down - a hurdle module 3 prices and module 6 must clear. Depth decides whether your size is invisible or is the day's event. And the tier moves with stress: small-name spreads gap wider exactly when holders want out, which is module 4's single-name risk wearing its execution clothes. The habit: check the spread and typical volume before caring about a name's chart - the tier is the first fact about any stock, because it prices every other fact.

The index shadow

Tiers also decide how much of lesson 3's flow a name receives. Index membership brings the obligated buyers and the closing-auction depth; falling out of an index removes them. The same company can occupy different tiers in different years purely through membership - a preview of module 8's index-effect material, and one more way liquidity is a property of the name-as-listed, not the business underneath.