The Most Liquid Currency Pairs

The Most Liquid Currency Pairs

Liquidity – the property of assets to be sold quickly and closest to the market price.

However, one definition is not enough to answer the question «What currency pair is the most liquid?» since such liquidity must somehow be measured.

Ideally, we calculate the total volume of all pending orders for a specific currency pair and compare it to the volume of the other pairs. By doing so we can rank the currency pairs from the most to the least liquid.

However, we cannot calculate these volumes since the Forex market has no single center, and God knows how many open orders currently there are, indeed.

On the other hand, we have some data on the activity of various currency pairs, namely, every pair’s share of the total volume.

Thus, if we take the entire volume of transactions in the Forex market as 100%, each pair will constitute a certain share in the total volume.

The Most Liquid Currency Pairs

We obtained a chart displaying the share of each currency pair as of January 2019:
The Most Liquid Currency Pairs

Note: We cannot guarantee that this chart 100% reflects the current market situation, but the margin of error does not exceed 5-10%.

So, the most liquid currency pair is EUR/USD, which accounts for more than 20% of the total volume of transactions in the Forex market.

The second most liquid forex pair is USD/JPY with a share of 14%.

The third most liquid is AUD/USD (9%).

Information on further currency pairs can be found in the chart above.

By the way, the least liquid currency pair in the chart above is GBP/CHF. The XAG/USD is not a currency pair.

Of course there are other a lot of other pairs, mainly exotic ones, but nobody knows which one of them is least liquid. They probably have no liquidity at all compared to majors.

What makes liquid pairs interesting for us?

If you take interest in the most liquid currencies, it matters to you. Indeed, the quality of order execution is highly dependent on the liquidity and commission costs.

More liquid pairs are characterized by:

  • rare slippage;
  • lower spread;
  • fast execution of orders.
Spread and most liquid pairs
Spread of the most liquid pairs

This is the reason why many traders prefer trading in more liquid currency pairs only, and some of them «get stuck on» EUR/USD and don’t even consider other pairs for trading.

Truly speaking, the difference in liquidity among the seven major pairs is not substantial enough to confine yourself to trading in one of them only.

By the way, now that we're talking about the major currency pairs… not the pairs themselves have the liquidity, but the currencies constituting the pairs.

Put the phrase «currency pair» in the above definition of liquidity and you’ll get: “Liquidity is the property of a currency pair to be sold quickly…". However, we don't sell a currency pair itself but sell/buy a specific currency. Accordingly, the liquidity of a currency pair derives from the liquidity of its constitutive currencies.