The 'Dark Matter' of Capital: Why Paper Profits Evaporate
In retail trading, screen profits frequently disguise an inability to monetize. When a stock has tight liquidity, selling a position requires eating into sequentially lower bids across the order book.
"The central question in all of quantitative finance is liquidity. Yet there is no formula for it... observable only in its absence. You try to sell 100 shares, and you succeed in selling only 50 and the offer price drops by 50 cents. Do you sell the remaining at 50 cents lower only to find the offer has dropped another dollar?" — Quora Market Discussion
When order size exceeds a notable fraction of daily turnover (typically > 10%), traders experience severe market impact, wider spreads, and in emerging micro-caps, lockup at lower price circuit breakers.