We analyze an asset market with sequential arrival of agents in which imbalances of supply and demand are an implication of efficiency without any frictions. This setup permits us to unambiguously categorize states of the market as buyers’, sellers’ or neutral markets and to provide clear-cut yet intuitive definitions of the breadth, depth, thickness, and liquidity of a market. As these concepts relate only to efficiency, they are primitive economic notions. The efficient adjustment dynamics to shocks, defined as out-of-equilibrium states, involve “fire trades“—the immediate liquidation of trades whose level exceeds the efficient storage threshold—followed by slow adjustments to a neutral state. Our framework also allows us to analyze optimal policy interventions, whereby a benevolent policymaker, observing the state of the order book, can improve next period’s distribution at some cost to society.