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A liquid market is one where traders are prepared to buy and sell a financial asset in the market. It can also be used to describe a situation where there is plenty of tradable cash made available by the various market players to trade the markets. It can also be used to describe a state where there are many traders available to buy and sell instruments. As such, it makes trade executions faster as there are always ready buyers and sellers. Cost of transactions is also lower in a liquid market. This explains why the EUR/USD pair which is the most traded pair in the forex market has spreads which are as low as 0.8 pips with some brokers, but less traded currency pairs like the EUR/SEK have spreads of up to 50 pips.

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