Hi sh50,
There is no need to plot the OI on the charts. But when there is any abnormal surge in volume, just check if the OI has increased or decreased. If the OI has increased with an increase in the CoC, then there are fresh long positions being taken. This would happen around the time a resistance is broken and market participants take a bet that the markets will rally further. If the OI has increased with a decrease in the CoC, then fresh short positions are being taken. This would happen when supports are broken. If the OI has decreased with an increase in the CoC, then shorts are being covered. If the OI has decreased with a decrease in the CoC, then longs are being covered. However, these are not holy writ, and are rules of thumb. The actual reasons could be far from what situations I have described, but this is generally the case. The NSE dissemnates this info at a 10 min interval on the NEAT terminal. However, this may not always be correct since trading members do not always flag the orders as open/ close.
The OI for futures is the same for the short side and the long side. This is coz for every buyer there is a seller. Trying to find out if the shorts or longs are more aggressive would entail looking at the CoC. Higher CoC would mean that buyers are more aggressive, while low CoC would mean that the sellers are more aggressive. However, very high CoC's would not be a very good thing. For one, it could mean that speculators are plunging into the market and driving up the futures prices without there being follow up buying in the cash market. Secondly, when CoC's are high, arbitrageurs will enter the market by buying the stock and selling the futures. This would reduce the CoC, but the buying that came in is not genuine investment buying.
Any market shows surges in volume at peaks and bottoms. Greed and fear. And the F&O market provides a leveraged playing field. This makes is doubly interesting. While deciding whether F&O turnover is "high", we can look at the ratio of F&O turnover to cash market turnover. Rising ratios would mean that the markets could be nearing an inflexion point.
Congratulations on buying the 1950 call, hope that you make some good money on it. I agree with your consultant, but the market has to hold 1970 tomorrow too, and then the next resistance is around 2010, after which 2040 is the next resistance.
Swingtrader and just4trades, thanks for the kind words.
Have a great weekend.
There is no need to plot the OI on the charts. But when there is any abnormal surge in volume, just check if the OI has increased or decreased. If the OI has increased with an increase in the CoC, then there are fresh long positions being taken. This would happen around the time a resistance is broken and market participants take a bet that the markets will rally further. If the OI has increased with a decrease in the CoC, then fresh short positions are being taken. This would happen when supports are broken. If the OI has decreased with an increase in the CoC, then shorts are being covered. If the OI has decreased with a decrease in the CoC, then longs are being covered. However, these are not holy writ, and are rules of thumb. The actual reasons could be far from what situations I have described, but this is generally the case. The NSE dissemnates this info at a 10 min interval on the NEAT terminal. However, this may not always be correct since trading members do not always flag the orders as open/ close.
The OI for futures is the same for the short side and the long side. This is coz for every buyer there is a seller. Trying to find out if the shorts or longs are more aggressive would entail looking at the CoC. Higher CoC would mean that buyers are more aggressive, while low CoC would mean that the sellers are more aggressive. However, very high CoC's would not be a very good thing. For one, it could mean that speculators are plunging into the market and driving up the futures prices without there being follow up buying in the cash market. Secondly, when CoC's are high, arbitrageurs will enter the market by buying the stock and selling the futures. This would reduce the CoC, but the buying that came in is not genuine investment buying.
Any market shows surges in volume at peaks and bottoms. Greed and fear. And the F&O market provides a leveraged playing field. This makes is doubly interesting. While deciding whether F&O turnover is "high", we can look at the ratio of F&O turnover to cash market turnover. Rising ratios would mean that the markets could be nearing an inflexion point.
Congratulations on buying the 1950 call, hope that you make some good money on it. I agree with your consultant, but the market has to hold 1970 tomorrow too, and then the next resistance is around 2010, after which 2040 is the next resistance.
Swingtrader and just4trades, thanks for the kind words.
Have a great weekend.
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