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    Open Interest IN FOREX

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    PSX Technical Analysis
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    Open Interest IN FOREX

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    PSX Technical Analysis
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    related to forex.....

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    related to forex.....

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    Download as docx, pdf, or txt
    11 views6 pages

    Open Interest IN FOREX

    Uploaded by

    PSX Technical Analysis
    related to forex.....

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 6

    Azhar Abbas

    Lecture: Open interest


    Contact:03457653430
    Email: [email protected]

    Open Interest
    Open interest is the total number of outstanding contracts, such as futures that have not been settled for
    an asset. The total open interest does not count, and total every buy and sell contract. Instead, open
    interest provides a more accurate picture of the trading activity, and whether money flows into the futures
    market are increasing or decreasing.

    Open Interest Explained


    The open interest number only changes when a new buyer and seller enter the market, creating a new contract, or
    when a buyer and seller meet—thereby closing both positions. For example, if one trader has ten contracts short (sale)
    and another has ten contracts long (purchase), and these traders then buy and sell ten contracts to each other, those
    contracts are now closed and will be deducted from open interest.

    How to Anticipate the Price Movement with Open Interest


    (6 Indications of Open Interest)

    1.Price Rising with OI Rising (Bullish)


    2.Price Falling with OI Leveling/Falling (Bullish)
    3.Price Rising with OI leveling/Falling (Bearish)
    4.Price Falling with OI Rising (Bearish)
    5.Price in Range with OI Falling (Bullish)
    6.Price in Range with OI (Bearish)
    1.Price Rising with OI Rising (Bullish)

    Price Open Interest


    Price Falling with OI Leveling/Falling (Bullish)

    Open Interest

    Price Open Interest

    3.Price Rising with OI leveling/Falling (Bearish)

    Price Open interest open interest

    4.Price Falling with OI Rising (Bearish)


    Price Open interest

    5.Price in Range with OI Falling (Bullish)

    Price Range open interest

    6.Price in Range with OI Rising (Bearish)

    Price Range open interest


    Open Interest vs Trading Volume

    Open interest is sometimes confused with trading volume, but the two terms refer to different measures. On a day
    when one trader who already holds 10 option contracts sells those 10 contracts to a new trader entering the
    market, the transfer of contracts does not create any change in the open interest figure for that particular option.

    No new option contracts have been added to the market because one trader is transferring their position to
    another. However, the sale of the 10 option contracts by an existing option holder to an option buyer does increase
    the trading volume figure for the day by 10 contracts.

    Open Interest and Trend Strength


    Open interest is also used as an indicator of trend strength. Since rising open interest represents additional money
    and interest coming into a market, it is generally interpreted to be an indication that the existing market trend is
    gaining momentum or is likely to continue.

    For example, if the trend is rising for the price of the underlying asset such as a stock, increasing open
    interest tends to favor a continuation of that trend. The same concept applies to downtrends. When the stock price
    is declining, and open interest is increasing, open interest supports further price declines.

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