Forex glossary
Forex Liquidity
Forex liquidity is the ability to execute a given trade size quickly without a large price impact. It includes spreads, available depth and how quotations respond to orders. It varies with the pair, time, events and counterparty access; high turnover does not guarantee every order's execution at the displayed price.
Illustrative example
How does it work in practice?
In a hypothetical order book, selling 10,000 EUR fits at the best quote, while selling 1 million EUR reaches several levels. The same narrow spread does not imply the same average execution price for both orders.
A case to work through
Two offered levels
Hypothetically buy 20,000 EUR: 10,000 available at 1.1000 and 10,000 at 1.1004 USD per EUR.
- Cost is 11,000 + 11,004 = 22,004 USD.
- Average price is 22,004 ÷ 20,000 = 1.1002.
What follows? Assess depth alongside the best quote.
Example boundary: Sizes are fixed, fills complete and other charges excluded.
From size to average price
Text description of the diagram
- First level: 10,000 EUR at 1.1000 USD per EUR.
- Second level: 10,000 EUR at 1.1004 USD per EUR.
- Average: 22,004 USD ÷ 20,000 EUR = 1.1002.
A useful distinction
Forex Liquidity / Liquidity providers
A provider offers quotes; liquidity describes available execution conditions.
Check your understanding
Calculate a weighted average fill in a static hypothetical book.
Show the answer and explanation
No, check available amounts
Depth limits execution at the best price.
FX participants, access and execution
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Read the fuller explanation
Related terms
Sources and documentation
- bis.org
- The FX trade execution landscape through the prism of the 2025 BIS Triennial Survey
Describes fragmented FX execution, dealers, non-bank providers and internalised flows.
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The example illustrates the mechanism. Check current account conditions and instrument specifications with the provider.