Forex glossary
Liquidity
The ability to transact a specified quantity at available prices. A visible quote does not ensure that the entire order can be filled at that price.
Illustrative example
How does it work in practice?
In a hypothetical book, you buy 500 EUR at 1.1000 and another 500 EUR at 1.1004 USD per EUR. The full purchase costs 1,100.20 USD before fees; the best quote covered only half.
A case to work through
Insufficient quantity at the best offer
Model: best ask is 1.0850 for 400 EUR; the buy request is 1,000 EUR and further offers are unknown.
- The visible best offer covers 40% of the request.
- The remaining 600 EUR cannot be priced without more data.
What follows? Do not value the whole order from one undersized offer.
Example boundary: The visible book need not show every execution opportunity.
A useful distinction
Liquidity / spread (bid-ask spread)
Spread describes the difference between two prices; liquidity also concerns available quantity.
Change an assumption, see the result
What changes if…?
Compare requested and actually filled quantity; the model does not price further book levels.
One hypothetical EUR/USD fill. Requested quantity is not confirmed execution. The model does not predict whether the remainder will fill or the price of later fills.
Check your understanding
Match available quantity to requested volume.
Show the answer and explanation
400 EUR, worth 434 USD
400 × 1.0850 = 434; the remainder needs data.
Orders, prices and execution quality
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Related terms
Sources and documentation
- MetaTrader 5: basic trading principles
Orders, deals and positions; FOK, IOC and partial-filling policies.
Document read: - BIS MAR10: market risk terminology
VaR at a stated horizon/confidence and expected shortfall as a tail mean.
Document read:
The example illustrates the mechanism. Check current account conditions and instrument specifications with the provider.