Open Interest

avinash

Active Member
#1
Hi Traderji/Senior members/other Futures Traders,
Hear this word used about Open Interset every day;I know it has something to do with volume in that future......how can I use that to help me to trade or is it just a statistic?

Am a newbie at this.....Would be very greatful if you could respond despite your busy schedule.

Thanking you in advance

Avinash
 
#2
Hi Avinash,
Am a beginner in this field myself but like I said before.....always glad to help someone who really wants to learn(again,can only help to the extent that I know.....the inner intricacies you got to find out from the other more experienced traders who are there in this forum......or Traderji himself!)

Simply put,open interest is the number of contracts that are still outstanding.Therefore,when one new buyer + one new seller enters the market,open interest increases by one.When the buyer sells his position and the seller covers his position,open interest decrease by one.Also,new buyer buys from an old buyer who sells his contract,then open interest remains unchanged.Vice versa for the seller,it remains unchanged.
Open Interest is not just a statistic.....very useful for every futures trader!!

Few scenarios and how we can profit:
1.Price in uptrend + open interest is rising >>>BULLISH!!!
2.Price in downtrend + open interest is rising >>>BEARISH!!!
3.Price in uptrend + open interest is falling >>>BEARISH!!
4.Price in downtrend + open interest is falling >>>BULLISH!!!

I am sure there are more possible scenarios.....also sure that more ways to profit from Open Interest other than those listed above,but can't help you there.Others have got to answer that one!

Happy Trading!!
Saint
 
#7
Most welcome,Avinash ,Sara,Phoenix......but check out the link above.Superbly put....very important for all of us if we r in futures trading!
 
#10
Saint said:
Hi Avinash,
Am a beginner in this field myself but like I said before.....always glad to help someone who really wants to learn(again,can only help to the extent that I know.....the inner intricacies you got to find out from the other more experienced traders who are there in this forum......or Traderji himself!)

Simply put,open interest is the number of contracts that are still outstanding.Therefore,when one new buyer + one new seller enters the market,open interest increases by one.When the buyer sells his position and the seller covers his position,open interest decrease by one.Also,new buyer buys from an old buyer who sells his contract,then open interest remains unchanged.Vice versa for the seller,it remains unchanged.
Open Interest is not just a statistic.....very useful for every futures trader!!

Few scenarios and how we can profit:
1.Price in uptrend + open interest is rising >>>BULLISH!!!
2.Price in downtrend + open interest is rising >>>BEARISH!!!
3.Price in uptrend + open interest is falling >>>BEARISH!!
4.Price in downtrend + open interest is falling >>>BULLISH!!!

I am sure there are more possible scenarios.....also sure that more ways to profit from Open Interest other than those listed above,but can't help you there.Others have got to answer that one!

Happy Trading!!
Saint
Thanks Saint for an excellent write-up!

Dhanya
 

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