Liquidity

Liquidity describes how easily and quickly you can buy or sell without significantly moving the price. The forex market is the most liquid financial market in the world, but liquidity isn't distributed evenly. EUR/USD during the London session is extremely liquid (tight spreads, instant execution). USD/TRY at 3 AM UTC is far less so.

High liquidity benefits traders in three ways: tighter spreads (lower cost), faster execution (less slippage), and the ability to enter and exit large positions without moving the market. Low liquidity has the opposite effects — wider spreads, potential slippage, and difficulty closing positions at desired prices.

Liquidity fluctuates throughout the day. It's highest during the London-New York overlap (13:00-17:00 UTC), good during individual London and New York sessions, moderate during Tokyo, and thinnest during the Sydney session and around the daily rollover. If your strategy is sensitive to execution quality, timing your trades for high-liquidity periods makes a real difference.