Often we notice about the preferences of Forex market, amid them there is a liquidity. What is liquidity? Liquidity – the capacity of holdings to be quickly sold at a price close to the market price. Liquid market – the market on which members can make transactions without significant impact on the market price, they can work with large sum of money. How it is possible to see if the market is liquid or not? There are many varied parameters that can describe this.

One of the characteristics of the liquidity is the price spread. Price spread – the difference between prices of supply and demand, prices of sale and purchase, prices of Bid and Ask of the asset at a concrete time. This difference has also the name of the bank margin. Market is more liquid if there is narrow spread.

Another characteristic of the market liquidity is its tighness. This concept defines the deviation of some transaction price (demand price or supply price) from the average market price of already performed transaction. To mensurate the tighness of the market the quantity of the price spread is applied. In this case, the price spread can have different kinds. For example, the most precise measure of the tighness of the market is the effective spread, which is equal to the difference between the actual transaction price and the average price of the market at the time of transaction fulfillment. The transaction course is also significant, because while there is an increase of prices on the market, the effective spread will be upper when you buy an asset than when you sell it.

Also the liquidity of the market is displayed by its depth. Market depth shows the activeness of its participants. It shows the maximum transaction volume with which an operation is possible without an essential influence on the current market price, also reflects the amount of orders at the market-maker at a concrete time. Quantitative evaluation of market depth is necessary to identify the maximum amount of the transaction, which can be carried out without the advent of exception from the average market price.

The resiliency of the market demonstrates the speed at which price variability caused by transaction conduction disappears or the speed of elimination of the imbalance in prices between supply and demand. There is still no universally admitted indicators to observe the recovery of the market.

The liquidity characteristics are not always convenient because of lack of essential statistical information, as well as the main drawback is their static nature. Nevertheless, despite the complication of obtaining these criteria, their use can be very substantial.

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