Add training workflow, datasets, and runbook
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10a COMPleTe gUiDe TO THe FUTUres MarKeT
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initial months (and sometimes even years) of trading. By monitoring the volume and open interest
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fi gures, a trader can determine when the market’s level of liquidity is suffi cient to warrant participa-
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tion. Figure 1.1 shows February 2016 gold (top) and april 2016 gold (bottom) prices, along with
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their respective daily volume fi gures. February gold’s volume is negligible until november 2015,
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at which point it increases rapidly into December and maintains a high level through January (the
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February contract expires in late February). Meanwhile, april gold’s volume is minimal until Janu-
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ary, at which point it increases steadily and becomes the more actively traded contract in the last
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two days of January—even though the February gold contract is still a month from expiration at
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that point.
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The breakdown of volume and open interest fi gures by contract month can be very useful in
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determining whether a specifi c month is suffi ciently liquid. For example, a trader who prefers to
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initiate a long position in a nine-month forward futures contract rather than in more nearby con-
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tracts because of an assessment that it is relatively underpriced may be concerned whether its level
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of trading activity is suffi cient to avoid liquidity problems. in this case, the breakdown of volume and
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open interest fi gures by contract month can help the trader decide whether it is reasonable to enter
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the position in the more forward contract or whether it is better to restrict trading to the nearby
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contracts.
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Traders with short-term time horizons (e.g., intraday to a few days) should limit trading to the
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most liquid contract, which is usually the nearby contract month.
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FIGURE 1.1 V olume shift in gold Futures
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Chart created using Tradestation. ©Tradestation T echnologies, inc. all rights reserved.
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