liquidity (forex liquidity)

The concept of liquidity is found in almost all areas of financial activity; it is not alien to the Forex market; in this case, its indicator is assessed as the demand for the selected trading instrument.

liquidity (forex liquidity) – characterizes how popular a particular currency pair is in the forex market. It usually depends on the amount of supply and demand for a given instrument, how quickly the submitted application finds a counter one in a similar currency.

In most cases, the size of the spread for the selected trading instrument depends on liquidity.

The more popular the currency pair, the lower the broker’s commission for it and the faster orders are executed. The dependence of the spread size on supply and demand can be observed during periods of low market activity, which means reduced Forex liquidity for almost all trading instruments.

At these moments, the spread may increase several times, which significantly reduces the likelihood of making a profit. The most liquid currency pairs on Forex are -

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

Forex liquidity is also the main indicator, based on which you can choose the most suitable instrument for trading, because if a currency pair is in high demand, then there is not only a low spread for it, but also an active trend movement.

And these two factors create excellent conditions for making money. In addition to the foreign exchange market, the term liquidity is widely used in relation to goods, banking services, shares, securities, real estate, equipment and other assets.

The faster the asset in question can be converted into cash equivalent, the more liquid it is, and the proximity of the selling price to the real market value of the asset is also taken into account.