Liquidity and Market Depth

Liquidity is perhaps one of the most important elements in gauging opportunities in a market. At its core, liquidity is the collective expression of traders' opinions on the market.

Like any other market, these opinions are represented in a futures market either as existing positions held by traders, known in futures as open interest, or as buy or sell orders communicated to the rest of the market but yet to be executed.

The size and price of these orders may vary considerably, but the key element to consider is that the more opinions expressed in the market, the more liquid the market is. 

Why is liquidity such an important element of market opportunity?

The reason is that the more participants there are, the more expressions of opinion on the market, the greater the likelihood that a single trader, like yourself, will encounter another with an opposing viewpoint that results in you both agreeing on a quantity and price to trade.

Another aspect to market liquidity is the ability to quickly check whether there is enough potential volume to suit their trading strategy. For example, an asset manager entering a new position with a large quantity of contracts would want to see a deep liquid market. A deep market allows them to execute a large order efficiently, while not causing significant price movements. The result is a more efficient execution, which reduces the trade impact costs of the transaction.


Understanding liquidity in a market is a critical consideration for traders before jumping into a trade. Futures markets offer deep liquid markets that let traders express their opinions in a tremendously efficient way.

Test your knowledge


Did you know that CME Institute classes can fulfill CFA and GARP continuing education requirements? Every CME Institute course can be self-reported in your CFA online CE tracker and select classes can be used for GARP credits. See which of our classes qualify for GARP credits here.

What did you think of this course?

To help us improve our education materials, please provide your feedback.

Extend your learning

Put your knowledge into practice with the Trading Simulator

Get hands on experience with the latest Trading Challenge

CME Group is the world’s leading derivatives marketplace. The company is comprised of four Designated Contract Markets (DCMs). 
Further information on each exchange's rules and product listings can be found by clicking on the links to CME, CBOT, NYMEX and COMEX.

© 2022 CME Group Inc. All rights reserved.