Liquid currency pairs on Forex: advantages of trading them
The term “liquid asset” is very often used when it comes to trading in financial markets.
In Forex, it is applied to currency pairs, and characterizes how popular and in demand this pair is among trading participants.
Liquidity in the classical sense is the speed at which you sell your asset at the market price, how in demand it is, how quickly a buyer is found and what it costs you.
Based on this, liquid currency pairs on Forex should be sold at record speed, but in reality everything is a little different.
The speed of order execution in the trader's trading platform is approximately the same, regardless of which pair you have chosen, but the spread commission for opening transactions is significantly different.
It's important to compare not only the commission rate itself, but also the pip value for different currencies for the same transaction value. These values almost always differ.
In our particular case, you sell your commodity (currency) at the same speed, but pay a higher commission for selling less liquid assets.
It's the spread size that best characterizes which pair is currently enjoying the greatest popularity. This is confirmed by the unprecedented widening of the spread on days when liquidity drops to near zero, usually before holidays.
The most liquid currency pairs on Forex
There are currently quite a few, as Forex trading is growing in popularity every day:
EURUSD (Euro vs. US Dollar) is the most popular and, consequently, the most liquid pair. The spread for this currency pair often drops to 0, with the average spread being around 2 pips.
AUDUSD (Australian Dollar vs. US Dollar) is also a rather interesting trading instrument, with its highest trading volumes recorded during the Australian Forex session.
EURGBP (Euro vs. British Pound) – these two currencies are constantly vying for supremacy after Britain refused to join the Eurozone. Volatility is highest during the European trading session.
GBPUSD ( British Pound vs. US Dollar) is a traditional pairing. The currencies of two countries with the strongest economies will always trend.
USDJPY ( Dollar vs. Japanese Yen) is traditionally used by many traders to profit during Bank of Japan interventions.
EURJPY (Euro vs. Japanese Yen) – this pair has also gained considerable popularity in the forex market over the past few years.
USDCHF (US Dollar vs. Swiss Franc) – the Swiss currency is traditionally considered a safe haven for investors, so EURCHF is always in high demand.
These are the most liquid currency pairs found in the trading terminal, but other pairs include USDCAD, USDCNH, and EURCNY.
You can read about all currency pairs in the section - http://time-forex.com/pary
