Monday, September 22, 2014

Open Interest and Volume Relation

Here are some general guidelines on how the interaction of price and volume/open interest might affect value:

  • if both parties to the trade are initiating a new position ( one new buyer and one new seller), open interest will increase by one contract. 
  • If both traders are closing an existing or old position ( one old buyer and one old seller) open interest will decline by one contract. 
  • The third and final possibility is one old trader passing off his position to a new trader ( one old buyer sells to one new buyer). In this case the open interest will not change. 
  • By monitoring the changes in the open interest figures at the end of each trading day, some conclusions about the days activity can be drawn.
  •  Increasing open interest means that new money is flowing into the marketplace. The result will be that the present trend ( up, down or sideways) will continue. 
  • Declining open interest means that the market is liquidating and implies that the prevailing price trend is coming to an end.
  •  A knowledge of open interest can prove useful toward the end of major market moves. 
  • A levelling off of steadily increasing open interest following a sustained price advance is often an early warning of the end to an uptrending or bull market.
  • Price up, volume up, open interest up - bullish as it indicates traders still want to buy despite the higher price.
  • Price down, volume up, open interest up - bearish as increasing volume is driving the market lower.
  • Price up, volume down, open interest down - reduced buying interest and a possible market top.
  • Price down, volume down, open interest down - decreased selling interest at lower prices, indicating a bottom may be in place.

Open Interest
Market is Strong
Market is Weakening
Market is Weak
Market is Strengthening

Thursday, August 7, 2014

I am back from long break

Its been long time since a posted on this blog and happy that am blogging again.
Now that am back i am still thinking on what to start with.
As of now nothing seems to be coming to my mind. but am happy that i posted this blog and hope very soon i will blog here to update my knowledge and also readers knowledge :)  if at all any readers to my blog