Definition – What does Thin Market mean?
A thin market refers to situation where a currency pair is receiving a relatively low number of bid and ask offers. When the liquidity of the market – the supply of bid and ask offers – is low, volatility and spreads increase. A thin market often experiences drastic swings, making it difficult to trade systematically. A thin market is also referred to as a narrow market.
ForexTerms explains Thin Market
The forex market has trillions of dollars of liquidity sloshing through it, but thin markets can develop in particular currency pairs. All currency pairs can be hit by periods of market fear or disinterest that lower the number of buyers and seller, causing a thin market develop. That said, thin markets develop more frequently in exotic currency pairs that lay outside the eight most traded currency pairs. A liquid market is the opposite of a thin market.