Forex Market Liquidity – Chapter 2 | Learn Forex

What is Forex Market Liquidity?

Liquidity the term itself means in the financial world is “how easy to buy or sell your shares, contracts or in this case currencies”.

More simply, suppose you need to buy some Euro with US Dollar. Then you need someone in the market who will buy your US dollar & return you his Euro.

In order buy anything you always need someone who will sell that thing. Vice versa in case of sell. If you need to sell potato then you need someone who will buy your potato. This supply and demand availability is called liquidity.

The more participant in a specific market, the more liquid that asset will be. The currency market has the highest liquidity. Not to mention cryptocurrency these days is gaining liquidity also. World businesses cannot move without currency transactions over cross-border, thus there will always be a good flow of supply and demand in the forex market.

Who provides forex market liquidity?

The banks are liquidity providers. Because all of our currencies get exchanged via banks. Banks decide the rates based on the market supply and demand, availability of traders. The following are the top Global Banks who are the major forex market liquidity providers.

Bank Name


Total assets

Industrial and Commercial Bank of China China 24.14 trillion CNY
Mitsubishi UFJ Financial Group Japan 2.459 trillion USD
JPMorgan Chase & Co. United States of America (US) 2.5 trillion USD
HSBC Holdings PLC United Kingdom (UK) 2.374 trillion USD
BNP Paribas France 1.994 trillion EUR
Deutsche Bank Germany 1.591 trillion EUR
UBS Switzerland 935 billion CHF
Royal Bank of Canada Canada 1.2 trillion USD
ING Group Netherlands 845 billion USD
Commonwealth Bank Australia 933.1 billion AUD

* Total Asset Data based on 2016 records.

Above are the top-rated banks from major countries. Forex brokers take liquidity from different banks based on their legal availability and regulation. Those brokers who work with the top-level banks are the best forex brokers because they will provide you the best price, especially if they have a non-dealing desk (explained later in Chapter 9)

Who are Forex Market Player or Forex Market Participants?

forex market participants
Different forex market players or participants

Investors, traders who buy/sell currencies from the open market, via an online transaction or with Over the counter (OTC) are known as forex market participants.

There is a classification of different forex market players based on their trading volume. Institutional Investors/traders and retail forex traders. Other types of market participants are Speculator, Supply Side, Demand Side, Professional, Investors & lastly Novice traders.

Institutional Investors:

They can be a single person or group of people or any company or the bank that trades over a 1 million dollars account.

They generally execute almost 100+ standard lots per month or even per trading days. Banks are the biggest institutional traders as they trade billions of dollars per day.

Here are we are stating the currency in the dollar but actually it can be any currency on a large scale. Then comes the big trading firms that manage private funds from large investors. Institutional traders are basically the market movers. That’s why some retail traders like to follow bank trade levels or round numbered price levels (Explained later in the trading strategy section).

Retail Traders:

Retails traders are the common type of traders who manage the lower amount of trading volume than institutional traders. It can be from $1 to $100,000. In the forex market, a number of retail traders are usually higher than the institutional traders.

They are almost 80% of the market participants. Thus if you are a retail trader, please do not break your heart! A good retail trader with a properly sized account and stable strategy can make a good monthly return.

All forex brokerage services have a separate segment for both retail traders and institutional traders. Obviously, institutional traders get more benefits and; priority from forex brokers. Such as personal account managers, FIX API Trading, VIP Accounts, lower spread, and commissions, etc.

Classified by Market Time Spent:

There is also a classification based on trader time spent in the market.

Trader Type

Trade Duration

Scalper Second to Minute
Day Trader Full Trading Hours for the day
Swing Trader One day to week
Position Trader Month to Year
Investor Buy and Hold for value

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