Liquidity Filter

• 09/18/2017 at 8:13 AM #46451
  juanj

  Good Day Guys

  I am in the process of developing a screener and am trying to find an effective way to filter out low liquidity stocks.

  I am thinking about using a volume filter (Average[x](volume) > 1000) and maybe a gap screener (maximum x amount of gaps in last x days).

  But I would appreciate any ideas or if someone maybe already developed a nice liquidity filter I would appreciate if you can share it.

  Thanks

  

  juanj

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  09/18/2017 at 12:58 PM #46500
  juanj

  @Nicolas, your input, and experience will be appreciated.

  

  juanj

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  09/19/2017 at 8:30 AM #46563
  Nicolas

  You can check the Market Capitalization with this code:

  marketcap = close*volume>=300000000//market cap

  1	marketcap = close*volume>=300000000//market cap

  Of course, you can adapt the ‘300000000’ to filter more or less the stocks you want to find.

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  Nicolas

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  09/19/2017 at 4:01 PM #46615
  juanj

  Thank You Nicolas.

  Only problem with that is that as you know not all tradable instruments have volume available.

  I do make use of the Market Cap column in the screener window though when sorting the results.

  However was hoping of a more versatile technique to measure liquidity using price action for example.

  

  juanj

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  09/20/2017 at 7:36 AM #46642
  Nicolas

  Rough early morning ideas:

  _ check how many times a short term ATR has crossed a long term averaged one within the last X periods.

  _ check Rate Of Change behavior compared to long term one.

  Without Volumes, it’s all about price VS time.

  

  Nicolas

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  09/20/2017 at 9:05 AM #46654
  juanj

  Great ideas! So how would we incorporate that?

  Do a few tests using known liquid and illiquid stocks and measure behavior or expected ranges using something like the below?

  ATR Crosses:

  NearATR = AverageTrueRange[3] LongATR = AverageTrueRange[21] ATRCross = 0 For i = 1 to 50 Do If (NearATR crosses over LongATR) or (NearATR crosses under LongATR) Then ATRCross = ATRCross + 1 EndIf Next //Return ATRCross As "ATRCross"

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  NearATR = AverageTrueRange[3] LongATR = AverageTrueRange[21] ATRCross = 0   For i = 1 to 50 Do If (NearATR crosses over LongATR) or (NearATR crosses under LongATR) Then ATRCross = ATRCross + 1 EndIf Next   //Return ATRCross As "ATRCross"

  Rate of change:

  EMAperiod = 13 ROCperiod = 21   EMA = exponentialaverage[EMAperiod](close) SRoC = ( EMA - EMA[ROCperiod] ) / ( EMA[ROCperiod] ) * 100 AverageSROC = Average[21](SROC)

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  EMAperiod = 13 ROCperiod = 21   EMA = exponentialaverage[EMAperiod](close) SRoC = ( EMA - EMA[ROCperiod] ) / ( EMA[ROCperiod] ) * 100   AverageSROC = Average[21](SROC)

   

  

  juanj

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  09/20/2017 at 9:40 AM #46665
  Nicolas

  I would recommend something like this instead for the ATR crosses:

  NearATR = AverageTrueRange[7] LongATR = average[100](nearATR)//AverageTrueRange[21] ATRCross = 0 For i = 1 to 50 Do If (NearATR[i] crosses over LongATR[i]) Then ATRCross = ATRCross + 1 EndIf Next Return ATRCross As "ATRCross"

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  NearATR = AverageTrueRange[7] LongATR = average[100](nearATR)//AverageTrueRange[21] ATRCross = 0 For i = 1 to 50 Do If (NearATR[i] crosses over LongATR[i]) Then ATRCross = ATRCross + 1 EndIf Next Return ATRCross As "ATRCross"

   

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  Nicolas

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  09/20/2017 at 9:59 AM #46672
  juanj

  Yes, I like that, noticed that I forgot to specify the [i] in my code (typed it out without PRT open).

  Now I just need to look up a few stocks to get an idea of an acceptable Average ATRCross value.

  

  juanj

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