What is Liquidity?
The depth of buyers and sellers in a market — high liquidity = tight spreads, easy fills; low liquidity = wide spreads, slippage.
Liquidity describes how easily an asset can be bought or sold without significantly moving the price. Forex is the most liquid market in the world — $7+ trillion daily volume — but liquidity within forex varies by pair, session, and time of day.
Most liquid: EURUSD, USDJPY, GBPUSD, AUDUSD during London-NY overlap (13:00-17:00 GMT). Liquidity drops on Asian open (no major macro centers active) and during weekends.
Liquidity providers (LPs) are the Tier-1 banks (JPMorgan, UBS, Citi, Goldman, Deutsche), prime brokers, and inter-bank ECNs that quote bid/ask prices to retail brokers. The number of LPs a broker connects to is a quality signal — top brokers list 15-30+ LPs. More LPs = tighter aggregated spread (the broker picks the best LP for each trade).