liquidity (forex liquidity)

The concept of liquidity is found in virtually all areas of financial activity, and it is no stranger to the forex market, where it is measured as the demand for a chosen trading instrument.

Liquidity (forex liquidity) – characterizes the popularity of a particular currency pair on the forex market. It typically depends on the level of supply and demand for a given instrument and how quickly a placed order finds a counter order in a similar currency.

In most cases, the spread for a selected trading instrument depends on liquidity. The more popular a currency pair, the lower the broker's commission and the faster orders are executed.

The dependence of the spread on supply and demand can be observed during periods of low market activity, which means lower forex liquidity for virtually all trading instruments. During these periods, the spread can increase several times, significantly reducing the likelihood of making a profit.

The most liquid forex currency pairs are

EUR/USD – EURJPY – USDJPY – GBR/JPY – GBR/CHF – USDCHF – GBRUSD, and some other options.

Forex liquidity is also a key indicator for choosing the most suitable trading instrument. If a currency pair is in high demand, it will not only have a low spread but also a strong trend. These two factors create excellent conditions for profit.

Beyond the foreign exchange market, the term "liquidity" is widely used in relation to commodities, banking services, stocks, securities, real estate, equipment, and other assets.

The faster an asset can be converted into its monetary equivalent, the more liquid it is, and the proximity of the selling price to the asset's actual market value is also taken into account.