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2017issue C0258

Screen listed futures for execution liquidity first

Listed futures can be ranked by how readily outstanding contracts can be bought and sold. The archive workflow builds that order from an equal-dollar contract count, open interest, and a volume adjustment, and it treats the densest activity marks as the most active execution settings.

  • A liquidity filter ranks listed futures by how readily size can be put on and taken off, using range, outstanding contracts, and activity rather than the attractiveness of a signal.
  • Relative contract liquidity multiplies an equal-dollar contract count by total open interest and a volume factor that floors at 1 and compares volume to a 5,000-contract baseline.
  • Each comparison column is a proportional measure and is interpretable only against other entries in the same column.
  • In the 2017 snapshot, equity-index, Treasury-note, and WTI crude contracts occupied the densest liquidity ranks, while several smaller agricultural, currency, and metal contracts carried only a single activity mark.
Entries in this reading3 entries
Current trackVolume confirmation54 readingsLiquidity filter118 readingsOpen interest analysis118 readings

What a liquidity filter ranks

A liquidity filter is a pre-trade screen that ranks listed futures by how readily size can be put on and taken off, using range, outstanding contracts, and activity rather than the attractiveness of a signal.

A listed-futures liquidity rank can be formed by multiplying contract point value, a three-year maximum price swing, open interest, and a volume adjustment typically between 1 and 4. The ranking treats the densest activity marks as the most active execution settings and treats a market with one mark or none as thinly traded.

How relative contract liquidity is built

An equal-dollar contract count scales each market by contract value times the largest three-year price change so every count represents the same dollar opportunity unit. It is the number of contracts needed so that tick value times a three-year maximum price swing matches the same dollar opportunity unit as another market.

Open interest analysis uses the stock of outstanding futures as a size-of-market input when judging whether an order is executable. Volume confirmation checks that recent activity is large enough to support the liquidity rank, including a floor of 1 and an exponential comparison of volume to a 5,000-contract baseline.

Relative contract liquidity equals that equal-dollar contract count times total open interest times a volume factor defined as the greater of 1 or exp(ln volume / ln 5000) minus 2. The score is descending and comparable across listed futures as a measure of how easily a market's outstanding contracts can be bought or sold.

Effective percent margin is dollar margin divided by the three-year dollar range of the contract, then multiplied by 100. It is used to compare capital locked per unit of historical range.

How to read the comparison

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

Markets at the top of the relative-liquidity order are those whose outstanding contracts are easiest to buy and sell; markets at the bottom are the hardest.

A 2017 snapshot and a share-turnover check

In the 2017 snapshot, equity-index, Treasury-note, and WTI crude contracts occupy the densest liquidity ranks, while several smaller agricultural, currency, and metal contracts carry only a single activity mark.

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

Equal-dollar contract counts in the February 2017 liquidity ranking

Each bar is how many of that listed contract a speculator needed, in the February 2017 Stocks & Commodities table, to match the same three-year dollar profit potential as the other names. Markets appear in the published relative-liquidity order, so the easiest-to-execute contracts sit first even when they are not the smallest in equal-dollar size. Crude oil and several other energy and index names already equalized at one contract, while 30-day fed funds and canola needed 26. The trading-floor photograph on the page carries no numbers; these figures come from the table columns.
Each bar is how many of that listed contract a speculator needed, in the February 2017 Stocks & Commodities table, to match the same three-year dollar profit potential as the other names. Markets appear in the published relative-liquidity order, so the easiest-to-execute contracts sit first even when they are not the smallest in equal-dollar size. Crude oil and several other energy and index names already equalized at one contract, while 30-day fed funds and canola needed 26. The trading-floor photograph on the page carries no numbers; these figures come from the table columns.Listed U.S. commodity and financial futures · February 2017 snapshot · 2017-02-01T00:00:00.000Z to 2017-02-28T00:00:00.000Z

Contracts to trade equals tick dollar value times the three-year maximum price excursion; every name is weighted equally in that column. Relative contract liquidity itself was printed only as a dot bar (with overflow marks on the top names), so this series is the equal-dollar count, not a digitised dot score. Front months are those listed in the February 2017 snapshot, mostly March 2017.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
32 of 40 in the Volume confirmation track
201758-58 pp.Next on Volume confirmationFilter futures orders by liquidity, open interest, and volumeA liquidity filter ranks listed markets by activity, outstanding size, and range-adjusted contract value rather than by a directional thesis.
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 year2017100 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 name2012Filter futures liquidity using open interest and volume2013Pre-trade futures liquidity as an execution filter