Filtering for Success


Mar 18

There are many futures markets that one can trade. The question worth asking is which markets are offering the best opportunity and thus most worth focusing on?

One measure that may be of use that is widely used in the options world is IV Rank and the associated IV Percentile. Sage Anderson, over at TastyTrade, does an excellent job of describing IV Rank here. Even for the single market trader, this measure may help with setting expectations for the current regime.

Put simply, IV Ranks tells us where the current IV, implied volatility, is in comparison to its yearly high and low while IV Percentile tell us the percentage of days over the past year, that were below the current IV.

The IV Rank for the ES is a very low 8 and the percentile is only 23%. There are different ways to read and interpret this data. But, the simplest take way is that approximately 75% of the time the market was anticipating more movement then today. This suggests to me limited opportunity for day trading and a lower risk environment.

Today, some futures markets with higher IV Rank compared to others are:

  • Soybean, Wheat, Corn
  • British Pound
  • Crude Oil

Some other measures that may be most useful:

  • Average True Range
  • Average Dollar Range. This is simply the True Range or ATR multiplied by the point value of the contract.
  • Custom session ATR Ranges and Dollar Ranges. Example creating a session range for the first 2 hours of the day.
  • Total Volume
  • Recent Risk Adjusted Returns Of Other Traders or Systems.
  • VIX

Of course, I would not advise one to attempt to actively trade a market without being familiar with it. However, these measures can help to put the markets in context, filter among markets we consider to trade, highlight new markets that might be worth study and sim trading, and generate insight into the dominant narratives.

As for narratives, the dominant narrative seems to revolve around decreased perception of trade tensions with China; while the British Pound is clearly influenced by sentiments surrounding Brexit.

About the Author

The author is passionate about markets. He has developed top ranked futures strategies. His core focus is (1) applying machine learning and developing systematic strategies, and (2) solving the toughest problems of discretionary trading by applying quantitative tools, machine learning, and performance discipline. You can contact the author at