Glossary
Liquidity
Liquidity is how easily an asset can be bought or sold near its current price without moving that price.
What it means
In a liquid market, many buyers and sellers are active, spreads are tight and orders fill close to the quoted price. Major forex pairs during the main sessions are usually very liquid. Liquidity drops around market opens and closes, over holidays and in the minutes around big news, and that is when spreads widen and slippage grows.
In prop trading, liquidity shows up in two places. Traders feel it in their fills. Firms deal with it through their platform and price feed and, at firms that route some trades to live markets, through a liquidity provider. Firms should explain in their rules how fills are handled, and traders should expect worse fills when liquidity is thin.
Worked example
Illustrative numbers: at midday in London, a trader buys EUR/USD and fills at the quoted 1.1000. Seconds after a major data release, the same order fills at 1.1003, because fewer sellers are quoting near the price. That 3 pip difference is slippage caused by thin liquidity.
Start here
Start with an audit.
Tell us where your firm is today. We look at your site, your funnel and your marketing, then tell you what we would build first. There is no obligation to buy.
Instagram @propfirmstudios