There are always two sides to a trade, a purchase and a sale which traders can buy and sell. To be truly liquid traders must also be able to trade in substantial volume without this having any marked effect on prices.
If a market lacks liquidity then traders will often encounter delays in meeting orders to buy, frequently leading to a significant variation between the price when an order is placed and when it is executed. In addition, it may be hard to sell in a market that is not sufficiently liquid.
The currency exchange market, especially when trading in major world currencies such as the USD and GBP is extremely liquid and a huge number of trades are conducted each day. market with a trading volume that far exceeds that of other markets.
Markets carry trading costs which inevitably lower a trader's profits or increase his losses. However, when a market can keep its trading costs low it becomes attractive to traders and encourages both an increased number of trades and an greater trading volume.
