Liquidity in Forex

Liquidity in forex is how easily you can buy or sell a currency pair at or near the quoted price without moving that price much. In a liquid market an order of normal size barely changes the price. In a thin market it can push the price further, which the Bank of England calls price impact.

Where prices come from is covered in brokers and liquidity providers.

How does liquidity show in spreads and depth?

Liquidity shows as a tight spread between bid and ask and as deep volume at each price, so normal orders fill close to the quote. Depth is how much can be traded at each price; when the volume at the best price runs out, the rest of your order fills at a worse one.

The spread is the gap between bid and ask, and the US Federal Reserve says it would typically interpret wider quoted spreads as worse liquidity conditions. In the 2016 sterling flash episode, resting orders to buy sterling on a key interbank platform were completely exhausted for short periods.

Why is USDZAR less liquid than a major pair?

USDZAR is less liquid because far less trading happens in its quote currency: that currency took part in about 1% of daily spot turnover in April 2025, against roughly 87% for the dollar. The figures come from the Bank for International Settlements survey below. Compare each pair's spread in Market Watch to see the difference.

The Bank for International Settlements (BIS) reports $9.6 trillion of foreign exchange turnover a day in April 2025, with the US dollar on one side of 89.2% of trades. Its detailed tables show daily spot turnover of $2.58 trillion for the dollar, $838 billion for the euro and $29.5 billion for the quote currency of USDZAR, out of $2.96 trillion in total: roughly 87%, 28% and 1% (calculated from those tables). See currency pair.

When does liquidity thin?

Liquidity thins in quiet hours, around major holidays and during market stress, when fewer participants quote prices and spreads widen. The three cases below each come with a documented example, from the 2016 sterling flash episode to the rise in FX futures spreads in March 2020.

• Quiet hours. The 2016 sterling drop came at a time of day when trading activity is normally thin.
• Holidays. The FX Global Code gives an example of lower liquidity in the Asian session because of a major holiday.
• Market stress. In March 2020 the Fed found a notable increase in quoted spreads in FX futures. Big swings are covered under volatility.

Worked example: liquidity cost on USDZAR

Worked example. USDZAR quotes 18.1950 bid and 18.2050 ask. Buying $1,000 and selling straight back loses R10 to the spread. In a quiet hour the quote widens to 18.1850 and 18.2150, and the same round trip costs R30. A $100,000 order meets only $50,000 at 18.2050 and the rest at 18.2100, so it fills at 18.2075, about R250 more than 18.2050.

How do you check liquidity in MetaTrader 5?

In MetaTrader 5 you check liquidity in Market Watch, which shows Bid, Ask and Spread for each symbol, and in Depth of Market. Depth of Market opens from the Market Watch context menu. For over-the-counter instruments it may be built from the broker's quotes, so it is not the whole market's depth.

Each symbol's specification lists its trading sessions, and depth of market in MT5 shows how to read each level.

What do traders get wrong about forex liquidity?

The common mistake is assuming a liquid pair always fills at the same tight spread, when liquidity changes through the day, even on majors. Check the Spread column in Market Watch before you place an order, and size orders so they fit the depth shown.

The retail term liquidity sweep is a chart-reading idea about stop orders, a different use of the word.

Sources

• Bank for International Settlements (BIS), OTC foreign exchange turnover in April 2025, accessed 19 October 2026: turnover of $9.6 trillion a day and the US dollar on one side of 89.2% of trades. https://www.bis.org/publications/202509-commentary-otc-derivatives
• Bank for International Settlements (BIS), 2025 Triennial Central Bank Survey, Detailed tables (Tables 1 and 2.4), accessed 19 October 2026: daily spot turnover by currency, including the dollar, the euro and the quote currency of USDZAR, and total spot turnover. https://www.bis.org/publications/triennial-survey/rpfx25-fx-annex.pdf
• Bank of England, Staff Working Paper No. 687, The October 2016 sterling flash episode (author views, not Bank policy), accessed 19 October 2026: price impact, exhausted resting orders, thin trading at that time of day. https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2017/the-october-2016-sterling-flash-episode
• US Federal Reserve Board, What Do Quoted Spreads Tell Us About Machine Trading at Times of Market Stress? (FEDS Notes, 25 September 2020), accessed 19 October 2026: wider quoted spreads read as worse liquidity; spreads rose in FX futures in March 2020. https://www.federalreserve.gov/econres/notes/feds-notes/what-do-quoted-spreads-tell-us-about-machine-trading-market-stress-march-2020-20200925.html
• Global Foreign Exchange Committee, FX Global Code (updated December 2024), accessed 19 October 2026: an example of lower liquidity in the Asian session due to a major holiday. https://www.globalfxc.org/uploads/fx_global.pdf
• MetaQuotes, MetaTrader 5 Help, Market Watch, accessed 19 October 2026: Bid, Ask and Spread columns; Specification window with spread and sessions. https://www.metatrader5.com/en/terminal/help/trading/market_watch
• MetaQuotes, MetaTrader 5 Help, Depth of Market, accessed 19 October 2026: opens from the Market Watch context menu; over-the-counter depth may be built from broker quotes. https://www.metatrader5.com/en/terminal/help/trading/depth_of_market