Why Is Liquidity So Important In Forex?

One of the main nightmares of an investor is not being able to convert your investment into cash immediately without having a significant loss in value. The easier it is to convert an asset into money, the market is said to be more liquid.

Depending on the market in which the investment is invested, it is less liquid or more liquid. For example, the market for preferred shares is poorly liquid, however in the Forex market, very liquid investments.

Liquidity In The Forex Market

Until a few years ago, Forex was a market limited to central banks, investment funds, and large corporations. But currently, the Forex market is said to be the most liquid market in the world. Because operations are constantly carried out, and the market absorbs the volumes traded at the desired price. Daily trading volumes are usually around $ 3 trillion.

This liquidity occurs, especially when the main markets are open (London, USA, and Tokyo). At those times, there are always participants with the intention of trading, especially in the most traded currencies.

First, they open the Asian markets, later the European, and finally open the American markets. The market opens Sunday afternoon (US East Coast time) and closes Friday at 4:00 pm (Eastern time). This allows permanent access to markets with greater liquidity and a capacity to respond quickly to economic or political events that affect it. Despite everything, there are times when the market becomes less liquid, so we should consider how to hedging (สอน hedging, which is the term in Thai).

Therefore, the forex market is a global market, which is open 24 hours. This means that we can operate at any time of the day, although there will be times when there will be less liquidity and volatility. Another aspect to highlight is the liquidity of the Forex broker with whom you have contracted to carry out your operations.

Leave a Reply

Your email address will not be published.