Skip to main content
Track Volume confirmation
25 / 40
Search the archiveLibrary
Library

2012issue C1073

Filter futures liquidity using open interest and volume

A futures liquidity rank multiplies contract point value, a three-year maximum price move, open interest, and a volume factor. Relative contract liquidity is the equal-dollar contract count times total open interest times that factor, and each column is read only against other entries in the same column.

  • A liquidity filter ranks listed futures by how readily a position can be put on or taken off, combining contract size, a multi-year price range, open interest, and a volume adjustment.
  • Contracts to trade set an equal-dollar unit from tick dollar value and a three-year maximum price excursion.
  • Relative contract liquidity multiplies that unit by total open interest and a volume factor floored at one, so idle inventory is not treated as an active book.
  • Each column is a proportional comparison and is meaningful only against other entries in the same column.
Entries in this reading3 entries
Current trackVolume confirmation54 readingsLiquidity filter118 readingsOpen interest analysis118 readings

A comparative liquidity filter

A liquidity filter ranks listed futures by how readily a position can be put on or taken off. The screen combines contract size, a multi-year price range, open interest, and a volume adjustment so thin books can be rejected before an order is sent.

Relative activity was shown with marks: the most marks indicated the most activity, while one mark or none indicated little activity.

Equal-dollar contracts to trade

Contracts to trade for equal dollar profit equals tick dollar value times the three-year maximum price excursion. That figure is the number of contracts needed so one market's dollar profit potential matches another's.

Effective percent margin equals margin dollars divided by the three-year dollar price range of the contract, then multiplied by 100. The column compares how much historical swing that posted margin covers.

Open interest and the volume factor

A futures liquidity rank can be formed by multiplying contract point value, a three-year maximum price move, open interest, and a volume factor usually set between 1 and 4. Relative contract liquidity equals the equal-dollar contract count times total open interest times a volume factor. Higher ranks mark contracts that are easier to buy and sell as a group.

Open-interest analysis uses outstanding contract inventory as a multiplier in that relative-liquidity score, so markets with more existing positions rank as easier to trade as a book rather than as a single printed price.

Volume confirmation is a volume-based factor that scales the liquidity rank and is floored at one, confirming that open interest is turning over rather than sitting idle. That volume factor is the greater of 1 and an exponential of logged volume relative to 5,000 contracts, minus 2.

How the columns compare

Each column is a proportional comparison and is meaningful only against other entries in the same column.

For listed shares, period volume as a percentage of shares outstanding was treated as a turnover-rate proxy for trading liquidity.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
25 of 40 in the Volume confirmation track
201376-76 pp.Next on Volume confirmationPre-trade futures liquidity as an execution filterA futures liquidity rank can be formed by multiplying contract point value, a three-year maximum price motion, open interest, and a volume adjustment that typically sits between 1 and 4.
All readings on this track · 40 readings
  1. 1988Constructing volume-confirmation overlays on OHLC spreadsheet charts
  2. 1989Commodity advance-decline from delivery months
  3. 1989The most-active list as a three-layer breadth lab
  4. 1989Constructing a yield-curve volume-breadth composite
  5. 1989A bond-futures case study in support, volume, and confirmation
  6. 1989Volume-scaled price boxes and volume cycles
  7. 1990Futures-signed on-balance volume construction
  8. 1990Self-relative volume boxes for news-free breakouts
  9. 1990Broadening swings, demand tests, and volume filters
  10. 1991A same-session pressure test of breadth and volume share
  11. 1991Tick extremes that confirm double tops and bottoms
  12. 1991Constructing auction fuel from volume and open interest
  13. 1994Constructing On-balance volume with smoothing and timeframe confirmation
  14. 1996A volume-gated moving-average trend combination
  15. 1996Constructing four-state range-volume bars
  16. 1997Failed trade review of a descending-triangle breakdown
  17. 1997Construct a head-and-shoulders before the neckline break
  18. 2004Volume confirmation is not optional for a head-and-shoulders reversal
  19. 2007Constructing a three-factor volume-price confirmation filter
  20. 2007Constructing a three-condition moving-average entry with a volume filter
  21. 2008Breakout rules that wait for volume and liquidity
  22. 2011Screen futures liquidity with open interest and volume
  23. 2011Filter executable futures with liquidity and open interest
  24. 2012Rank listed futures by liquidity before a forecast chooses the name
  25. 2012Filter futures liquidity using open interest and volume
  26. 2013Pre-trade futures liquidity as an execution filter
  27. 2014A futures liquidity screen from range, open interest and volume
  28. 2014Evaluating futures contract liquidity before execution
  29. 2014Constructing defended price lines from volume clusters
  30. 2014Filter futures by equal-dollar size, open interest, and volume
  31. 2015Filter futures ideas by ranked contract liquidity
  32. 2017Screen listed futures for execution liquidity first
  33. 2017Filter futures orders by liquidity, open interest, and volume
  34. 2018Using open interest and volume to rank futures liquidity
  35. 2018Score listed futures as an execution menu before the setup
  36. 2019Filtering futures orders with liquidity, open interest and volume
  37. 2019Futures liquidity as an execution filter
  38. 2020A futures liquidity board as a pre-trade execution filter
  39. 2020Sequenced volume and golden-cross breakout rules
  40. 2020Use a listed-futures liquidity filter before execution
By fieldLiquidity and costs119 readingsBy year201281 readings
All 54 readings tagged Volume confirmation
Also on Volume confirmation5 readings
2011Filter executable futures with liquidity and open interest2011Screen futures liquidity with open interest and volume2012Rank listed futures by liquidity before a forecast chooses the name2013Pre-trade futures liquidity as an execution filter2014Evaluating futures contract liquidity before execution