Forex for a trader
Open interest sul forex

Open interest sul forexOpen Interest Online © Indicator - indicator for MetaTrader 4. I present to you a new version of the Open Interest Online © Indicator. Now it has become more intuitive with a new design. The main features are: - Automatic determination of background and color scheme; - There is an opportunity to show levels and their values which are closest to the price, it also can show all of 15 strikes. - Now it is possible to change level brightness and show only levels background. - Numerical values of the Open Interest by CallPut is optional, - Historical levels are optional. When Open Interest Put values becomes greater than Open Interest Call values the indicator color is red (color of short position), if Call becomes greater than Put, it's blue (color of long position). The color deep and brightness corresponds to the quantitative ratio of the Open Interest to its maximum level for this date, so now the level strength is more visual. The numerical values of the levels corresponds to CallPut ratios. Editor's remark: Note that it's an English translation of the original Russian version. Forex Trading Strategy – The Significance of Open Interest. « Trading via the AccumulationDistribution Indicator.

The Significance of Open Interest. This lesson will cover the following: What is open interest What do changes in open interest reflect Decision-making based on open interest. We have not discussed much about open interest so far in our guides which is why we will dedicate this article to it. In the options and futures markets, open interest represents the total number of contracts at the end of the current day which are not closed or delivered, thus the number of existing contracts. In the stock market, it reflects the number of buy orders submitted before the market opens. It is a common misconception that volume and open interest are the same. Open interest changes when new traders enter the market or old ones leave it, because their trade creates a new contract or closes an old one. For example, if the open interest in July silver futures traded on the Comex division of the NYMEX is 5 000, then 5 000 contracts are held by bulls and 5000 by bears. If that number jumps to 5 500, it means that 500 new contracts have been bought and sold short. Conversely, if open interest falls to 4 500, it means that bulls have closed 500 long positions, thus sold, while bears covered their shorts, thus bought. If a new bull enters the market and buys a contract from an old bull, then open interest remains the same because the number of contracts has not changed, they have just changed their owner. The same logic is in force for bears. Overpowering the counterpart. Open interest illustrates the intensity of the battle between bulls and bears. The higher the open interest, the stronger the disagreement between the two counterparts is as both bulls and bears are willing to maintain their long and respectively short positions. When either one of them reach to a conclusion the market won’t move in their desired direction, they will logically close out positions and open interest will decline.

As bulls and bears battle each other, one of the sides is bound to lose, but as long as there is a steady stream of potential losers coming in the market, the trend will continue. Rising open interest means that the number of losers is rising. In a bull trend, for example, rising open interest implies that bulls are buying, while shorts are selling since they are convinced the market has reached a high level and will soon reverse. However, as soon as losses become unbearable, they will cover their positions, thus buy, which will shoot the market even higher. However, if no new shorts enter the market, the trend is bound to exhaust soon enough. This means that rising open interest during a trend is favorable for its development and implies it will continue. The same logic is in force for bear trends. If a bull wants to buy, but there is no bear who wants to sell, the only possible way for him to procure a contract is to buy from an old bull, who has previously bought lower and now sells higher. In this situation open interest remains the same as no new contract has been created, it is just switching owners. If open interest remains flat during a trend, it suggests that the number of losers has stopped increasing. The same logic applies for downtrends.

The last possible scenario is for open interest to decline. Declining open interest means that losers have given up hope and are exiting the market. As the conflict between bulls and bears eases, the trend is bound to reverse soon. While the losing participants are exiting the market and are not being replaced by new losers, activity is declining, which causes the winning party to cash profits and shortens the trend’s life. For example in a bull trend, as shorts exit the market (cover their positions and buy), and are not replaced by new shorts, winning bulls close their positions and sell, thus both exit the market and market activity stalls. How to incorporate open interest in trading. Based on what we already said, we can summarize that both positive and negative changes in open interest, as well as the lack of change, give a sign about the current developments on the market, but also allow for predictions about future changes. When open interest rises during a trend, it suggests that the inflow of losers is rising and the trend will be sustained, thus a with-trend position is in order. When open interest flatlines during a market rally, it implies that the trend is in its exhaustion phase and the best long trades have already been done. This suggests to avoid entering new positions and tighten stops on already existing ones, bracing for the upcoming end of the trend. The same logic is in force for bear trends. When open interest declines during a rally, it stands to show that the two parties are coming to an agreement and are exiting the market.

In a bull trend, shorts cover their losses while bulls are locking in profits, generating a bearish signal. The opposite is in force for a bear trend. As a trend is accepted by the majority, its end is drawing near. When open interest is gaining heavily while the market is in a trading range, this should be seen as a bearish sign since it implies that commercial hedgers are more likely to short than speculators. When open interest declines during a trading range, it generates a bullish signal as it implies that commercial hedgers are covering their shorts in expectation for rising prices in the future. Additional help required. In general, volume and open interest are regarded as “secondary” technical indicators used to confirm other signals on the charts. Thus, experienced traders don’t base their decision-making solely on them, rather in conjunction with other signals to confirm their signals and to predict the extent of a market move. For example, a breakout accompanied by large volume suggest the move should be extensive, while a trend marking a new high on the base of low volume should raise attention. Moreover, the higher the open interest, the more liquid the market is, which improves the execution of orders and reduces slippage.

Thus, short-term traders which get in and out of trades more frequently, especially day traders, should choose markets with the highest open interest. The same counts for trading futures – you should choose the delivery months with the highest open interest. If you have any questions or suggestions you are welcome to join our forum discussion about Forex Trading Strategy – the significance of Open Interest . Join The Forum. Forex: Gauging Forex Market Sentiment With Open Interest. Market sentiment is the most important factor that drives the currency market, and assessing market sentiment is one aspect of trading that is often overlooked by traders. While there are quite a few ways of gauging what the majority of market participants are thinking or feeling about the market, in this article, we'll take a look at how to do this using interest analysis. Open Interest in Forex Open interest analysis is not uncommon among those who trade futures, but it is a different story for those who trade spot forex. One of the most important points to note about the spot forex market is that information pertaining to open interest and volume is not available because transactions are carried out over-the-counter, and not through exchanges. As a result, there is no record of all the transactions that have taken place or are taking place in all the "back alleys".

Without open interest and volume as vital indicators of the strength of spot price moves, the next best thing would be to examine the open interest data on currency futures. (For related reading, see Getting Started In Foreign Exchange Futures .) Spot FX Vs. FX Futures Open interest and volume data on currency futures allow you to gauge market sentiment in the currency futures market, which also influences, and is influenced by, the spot forex market. Currency futures are basically spot prices, which are adjusted by the forward swaps (derived by interest rate differentials) to arrive at a future delivery price. Unlike spot forex, which does not have a centralized exchange, currency futures are cleared at exchanges, such as the Chicago Mercantile Exchange (CME), which is the world's largest market for exchange-traded currency futures. Currency f futures are generally based on standard contract sizes, with typical durations of three months. Spot forex, on the other hand, involves a two-day cash delivery transaction. (To learn more, see Futures Fundamentals .) One of the many differences between spot forex and currency futures lies in their quoting convention. In the currency futures market, currency futures are mostly quoted as the foreign currency directly against the U. S. dollar .

For example, Swiss francs are quoted versus the U. S. dollar in futures (CHFUSD), unlike the USDCHF notation in the spot forex market. Therefore, if the Swiss franc depreciates in value against the U. S. dollar, USDCHF will rise, and the Swiss franc futures will decline. On the other hand, EURUSD in spot forex is quoted in the same manner as euro futures, so if the euro appreciates in value, euro futures will rise as the EURUSD goes up. (For more insight, see The Forex Market .) The spot and futures prices of a currency (not currency pair) tend to move in tandem; when either the spot or futures price of a currency rises, the other also tends to rise, and when either falls, the other also tends to fall. For example, if the GBP futures price goes up, spot GBPUSD goes up (because GBP gains in strength). However, if the CHF futures price goes up, spot USDCHF goes down (because CHF gains in strength), as both the spot and futures prices of CHF move in tandem. What Is Open Interest? Many people tend to get open interest mixed up with volume. Open interest refers to the total number of contracts entered into, but not yet offset, by a transaction or delivery.

In other words, these contracts are still outstanding or "open". Open interest that is held by a trader can be referred to as that trader's position. When a new buyer wants to establish a new long position and buys a contract, and the seller on the opposite side is also opening a new short position, the open interest is increased by one contract. It is important to note that if this new buyer buys from another old buyer who intends to sell, the open interest does not increase because no new contracts have been created. Open interest is reduced when traders offset their positions. If you add up all the long open interest, you will find that the aggregate number is equal to all of the short open interest. This reflects the fact that for every buyer, there is a seller on the opposite side of transaction. Relationship Between Open Interest and Price Trend Overall, open interest tends to increase when new money is poured into the market, meaning that speculators are betting more aggressively on the current market direction. Thus, an increase in total open interest is generally supportive of the current trend, and tends to point to a continuation of the trend, unless sentiment changes based on an influx of new information. Conversely, overall open interest tends to decrease when speculators are pulling money out of the market, showing a change in sentiment, especially if open interest has been rising before. In a steady uptrend or downtrend, open interest should (ideally) increase.

This implies that longs are in control during an uptrend, or shorts are dominating in a downtrend. Decreasing open interest serves as a potential warning sign that the current price trend may be lacking real power, as no significant amount of money has entered the market. Therefore, as a general rule of thumb, rising open interest should point to a continuation of the current price move, whether in an uptrend or downtrend. Declining or flat open interest signals that the trend is waning and is probably near its end. (To read more, check out Discovering Open Interest - Part 1 and Part 2 .) Putting it Together when Trading Forex Take, for example, the period between October and November 2004, when the euro futures (in candlesticks) embarked on a trend of higher highs and higher lows (as seen in Figure 1 below). As depicted in the upper chart window, there were several opportunities to go long on euro, whether by trading breakouts of resistance levels or by trading bounces off the daily up trendline. You can see in the lower window that open interest of euro futures had been increasing gradually as the euro went up against the US dollar. Note that the price movements of spot EURUSD (seen as blue line) moved in tandem with euro futures (candlesticks). In this case, the rising open interest accompanied the existing medium-term trend, hence, it would have given you a signal that the trend is backed by new money. However, sometimes you may get a strong clue that a trend is of a suspect nature. This clue usually comes in the form of falling open interest that accompanies a trend, whether it is an uptrend or downtrend. In Figure 2, you can see that the Sterling futures (in candlesticks) trended south between September and October 2006 (as did spot GBPUSD, seen as dark blue line).

During this same period, open interest fell, signifying that people were not shorting more contracts; therefore, the overall sentiment is not bearish at all. The trend then promptly reversed, and open interest started increasing. Conclusion Whether you are trading currency futures or spot forex, you can make use of the futures open interest to gauge the overall market sentiment. Open interest analysis can help you confirm the strength or weakness of a current trend and also to confirm your trade. © – MetaTrader 4. © . . – ; – , , 15 . – . – CallPut , – . Put ( ), , ( ). , . Put . MT4 Forex – . © – MetaTrader 4 Metatrader 4 (MT4) - . © – MetaTrader 4 , . , . Forex Metatrader 4 : $30 , . © Indicator – MetaTrader 4.mq4? © Indicator – MetaTrader 4.mq4 © – MetaTrader 4.mq4 Metatrader Metatrader 4 , 4 “ ” Metatrader 4 Open Interest Online © – MetaTrader 4.mq4 © – MetaTrader 4.mq4 . © Indicator – MetaTrader 4.mq4 Metatrader? , Metatrader 4 “ ” . , : Open Interest Online © Indicator - indicator for MetaTrader 4. I present to you a new version of the Open Interest Online © Indicator. Now it has become more intuitive with a new design. The main features are: - Automatic determination of background and color scheme; - There is an opportunity to show levels and their values which are closest to the price, it also can show all of 15 strikes. - Now it is possible to change level brightness and show only levels background. - Numerical values of the Open Interest by CallPut is optional, - Historical levels are optional. When Open Interest Put values becomes greater than Open Interest Call values the indicator color is red (color of short position), if Call becomes greater than Put, it's blue (color of long position).

The color deep and brightness corresponds to the quantitative ratio of the Open Interest to its maximum level for this date, so now the level strength is more visual. The numerical values of the levels corresponds to CallPut ratios. Editor's remark: Note that it's an English translation of the original Russian version. Forex Trading Strategy – The Significance of Open Interest. « Trading via the AccumulationDistribution Indicator. The Significance of Open Interest. This lesson will cover the following: What is open interest What do changes in open interest reflect Decision-making based on open interest. We have not discussed much about open interest so far in our guides which is why we will dedicate this article to it. In the options and futures markets, open interest represents the total number of contracts at the end of the current day which are not closed or delivered, thus the number of existing contracts. In the stock market, it reflects the number of buy orders submitted before the market opens. It is a common misconception that volume and open interest are the same. Open interest changes when new traders enter the market or old ones leave it, because their trade creates a new contract or closes an old one. For example, if the open interest in July silver futures traded on the Comex division of the NYMEX is 5 000, then 5 000 contracts are held by bulls and 5000 by bears. If that number jumps to 5 500, it means that 500 new contracts have been bought and sold short. Conversely, if open interest falls to 4 500, it means that bulls have closed 500 long positions, thus sold, while bears covered their shorts, thus bought. If a new bull enters the market and buys a contract from an old bull, then open interest remains the same because the number of contracts has not changed, they have just changed their owner.

The same logic is in force for bears. Overpowering the counterpart. Open interest illustrates the intensity of the battle between bulls and bears. The higher the open interest, the stronger the disagreement between the two counterparts is as both bulls and bears are willing to maintain their long and respectively short positions. When either one of them reach to a conclusion the market won’t move in their desired direction, they will logically close out positions and open interest will decline. As bulls and bears battle each other, one of the sides is bound to lose, but as long as there is a steady stream of potential losers coming in the market, the trend will continue. Rising open interest means that the number of losers is rising. In a bull trend, for example, rising open interest implies that bulls are buying, while shorts are selling since they are convinced the market has reached a high level and will soon reverse. However, as soon as losses become unbearable, they will cover their positions, thus buy, which will shoot the market even higher. However, if no new shorts enter the market, the trend is bound to exhaust soon enough. This means that rising open interest during a trend is favorable for its development and implies it will continue. The same logic is in force for bear trends. If a bull wants to buy, but there is no bear who wants to sell, the only possible way for him to procure a contract is to buy from an old bull, who has previously bought lower and now sells higher. In this situation open interest remains the same as no new contract has been created, it is just switching owners. If open interest remains flat during a trend, it suggests that the number of losers has stopped increasing.

The same logic applies for downtrends. The last possible scenario is for open interest to decline. Declining open interest means that losers have given up hope and are exiting the market. As the conflict between bulls and bears eases, the trend is bound to reverse soon. While the losing participants are exiting the market and are not being replaced by new losers, activity is declining, which causes the winning party to cash profits and shortens the trend’s life. For example in a bull trend, as shorts exit the market (cover their positions and buy), and are not replaced by new shorts, winning bulls close their positions and sell, thus both exit the market and market activity stalls. How to incorporate open interest in trading. Based on what we already said, we can summarize that both positive and negative changes in open interest, as well as the lack of change, give a sign about the current developments on the market, but also allow for predictions about future changes. When open interest rises during a trend, it suggests that the inflow of losers is rising and the trend will be sustained, thus a with-trend position is in order. When open interest flatlines during a market rally, it implies that the trend is in its exhaustion phase and the best long trades have already been done.

This suggests to avoid entering new positions and tighten stops on already existing ones, bracing for the upcoming end of the trend. The same logic is in force for bear trends. When open interest declines during a rally, it stands to show that the two parties are coming to an agreement and are exiting the market. In a bull trend, shorts cover their losses while bulls are locking in profits, generating a bearish signal. The opposite is in force for a bear trend. As a trend is accepted by the majority, its end is drawing near. When open interest is gaining heavily while the market is in a trading range, this should be seen as a bearish sign since it implies that commercial hedgers are more likely to short than speculators. When open interest declines during a trading range, it generates a bullish signal as it implies that commercial hedgers are covering their shorts in expectation for rising prices in the future. Additional help required. In general, volume and open interest are regarded as “secondary” technical indicators used to confirm other signals on the charts. Thus, experienced traders don’t base their decision-making solely on them, rather in conjunction with other signals to confirm their signals and to predict the extent of a market move. For example, a breakout accompanied by large volume suggest the move should be extensive, while a trend marking a new high on the base of low volume should raise attention.

Moreover, the higher the open interest, the more liquid the market is, which improves the execution of orders and reduces slippage. Thus, short-term traders which get in and out of trades more frequently, especially day traders, should choose markets with the highest open interest. The same counts for trading futures – you should choose the delivery months with the highest open interest. If you have any questions or suggestions you are welcome to join our forum discussion about Forex Trading Strategy – the significance of Open Interest . Join The Forum. Understanding Volume & Open Interest in Commodities. Technicians utilize a three dimensional approach to market analysis which includes a study of price, volume and open interest. Of these three, price is the most important. However, volume and open interest provide important secondary confirmation of the price action on a chart and often provide a lead indication of an impending change of trend. For beginning students of the market these two concepts tend to be somewhat confusing but are very important concepts to understand in - undertaking a thorough analysis of market action. Volume represents the total amount of trading activity or contracts that have changed hands in a given commodity market for a single trading day. The greater the amount of trading during a market session the higher will be the trading volume. As mentioned earlier, a higher volume bar on the chart means that the trading activity was heavier for that day. Another way to look at this, is that the volume represents a measure of intensity or pressure behind a price trend.

The greater the volume the more we can expect the existing trend to continue rather than reverse. Technicians believe that volume precedes price, meaning that the loss of upside price pressure in an uptrend or downside pressure in a downtrend will show up in the volume figures before presenting itself as a reversal in trend on the bar chart. Open Interest is the total number of outstanding contracts that are held by market participants at the end of each day. Where volume measures the pressure or intensity behind a price trend, open interest measures the flow of money into the futures market. For each seller of a futures contract there must be a buyer of that contract. Thus a seller and a buyer combine to create only one contract. Therefore, to determine the total open interest for any given market we need only to know the totals from one side or the other, buyers or sellers, not the sum of both. Each trade completed on the floor of a futures exchange has an impact upon the level of open interest for that day. For example, 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 day?s 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. The relationship between the prevailing price trend, volume, and open interest can be summarized by the following table. Volume and Open Interest. Background: By themselves, volume and open interest data may not be that valuable aside from indicating the liquidity of a market. But, used in conjunction with price action, these numbers serve as a strength indicator that can provide meaningful verification about the significance of a price move.

They have long been popular as indicators because they do not require computer power to provide price clues like more complex indicators that massage price data do. Volume is the number of transactions that take place during a specified period of time, usually one trading session. In most auction markets such as the New York Stock Exchange or futures or options markets, one buy and one sell equals a volume of one. As a dealer market, Nasdaq may report a volume of two for the same transaction - one when a trader sells shares to a dealer and one when another trader buys the 100 shares from the dealer. Open interest is the total number of futures or options contracts that have not yet been offset or fulfilled by delivery. If a new buyer (a long) and new seller (a short) enter a trade, their orders are matched and open interest increases by one. If a trader who has a long position sells to a new trader who wants to initiate a long position, open interest does not change as the number of open contracts remains the same. If a trader holding a long position sells to a trader wanting to get rid of his existing short position, open interest decreases by one as there is one less open contract. Purpose: Volume and open interest reflect traders' enthusiasm about participating in a market at a given price. If traders become anxious to get into or out of positions, they may drive volume up for that session; if they have little interest in trading a dull market, volume is likely to go down. Comparing figures from market to market or from session to session has implications for the price outlook. Stocks have a fixed number of shares so volume reflects the number of shares that change hands during a session. This number indicates the market's breadth and offers clues about how meaningful the price movement in the market is. Futures and options do not have a set number of contracts and no limit on how many contracts can be outstanding - theoretically, the number of contracts open could grow to any number, depending on market activity. The open interest figure indicates the depth or liquidity of a market, which influences a trader's ability to buy or sell at or near a given price without a lot of slippage. Basic signals: Volume and open interest are "secondary" technical indicators that help confirm other technical signals. The real significance of volume and open interest lies in their correlation to price. In general, if these two figures and high and rising, the existing trend strong; if volume and open interest are low and declining, the trend is weak. Here are some general guidelines on how the interaction of price and volumeopen interest might affect value: 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. There are a number of other possible combinations, some of which are neutral for future price action. Generally, a price breakout on heavy volume is a strong signal the move may continue as more traders get into the market; a big price move on light volume suggests not many traders are willing to pursue the move, meaning a top or bottom may be near or in place. To validate an uptrend, volume should be heavier on up days and lighter on down days within the trend. In a downtrend, volume should be heavier on down days and lighter on up days. Changes in open interest measure how much money is flowing into or out of a market, which helps evaluate a trending market. Very high open interest at market tops can cause a steep and quick price downturn. Open interest that builds up during a "basing" period can strengthen the price breakout when it happens. Open interest does have seasonal tendencies - that is, in some markets it is higher at some times of the year and lower at others. Traders will need to look at five-year seasonal averages of open interest and then compare the current situation with the average. If prices are rising in an uptrend and total open interest is increasing more than its seasonal average, it suggests new money is flowing into the market and aggressive new buying. That is bullish. But if prices are rising and open interest is falling by more than its seasonal average, the rally is the result of holders of losing short positions liquidating their contracts (short-covering) and money is leaving the market. This is usually bearish, suggesting the rally is ending.

Proscons: The correlation of volumeopen interest and price is not perfect, as illustrated during the September period on the chart below when both price and volume surged higher as E-mini S&P 500 Index futures and options were in the quarterly expiration cycle. But volumeopen interest do provide clues about what could happen to price based on market activity. These indicators are not price-based and provide insight that is not available from other indicators. However, they do not stand alone; traders will have to use chart patterns or other technical indicators to make decisions about where to place orders. Although stock markets generally provide a running tally of volume during a session, futures exchanges usually do not release that data until the following day, limiting the timeliness of making a decision using these indicators. All in one: Price, volume and open interest. By Larry Williams | November 14, 2007. Volume is a powerful indication of market strength. However, in many cases, we can get a better idea of its significance by tracking it over time, in terms of moves in the markets. One method for doing that is On Balance Volume (OBV). The index is calculated by adding today’s volume to a baseline (yesterday’s value) if the market closed up for the day or subtracting today’s volume if price closed down for the day. While the idea was largely popularized by well-known technician Joe Granville, who contends he discovered the idea on his own in 1961, it perhaps may have originated with two guys in San Francisco, known only as Woods and Vignolia. They authored a course in 1940 that referred to this calculation as “cumulative volume.

” Before we look at how this indicator can be improved by introducing price and open interest to create the Price, Open Interest, Volume (POIV) indicator, let’s look at a few examples of OBV to get an idea of how it works. The general philosophy behind OBV analysis is to find a stock that is making a new low in price while the OBV line is not matching that low. This condition suggests that sellers have dried up and the stock is in strong hands. Conversely, when price makes a new rally high that is not matched by a new high in OBV, the indicator is suggesting that the market has perhaps topped. Microsoft (MSFT) was a great OBV short sale in February 2006 (see “Windows down,” below). We saw massive divergence between price and the actual buying and selling as evidenced by the cumulative flow of volume, as measured by the OBV indicator. As price spurted up in late January, breaking out and sucking technicians into the stock, there was no support from volume buyers. OBV (the red line) was pathetic. This was the start of the fall, which continued into March and April and gave away to a significant tumble in the fortunes of Microsoft longs. “Fast on the fly” (below) shows the stock price of the company Fastenal (FAST). Notice the bullish divergent pattern in September 2005. As FAST took out the August lows in September, the X-Ray view of OBV was showing a different picture. OBV was holding up, not going to a new low, suggesting that on the September sell off, the stock was in strong hands. Indeed it was. Price rallied from $29 per share to more than $40 in fewer than 35 trading sessions. ISSUES WITH VOLUME.

Although we can see here that volume is a useful measure for the markets, there are real problems when we use volume. Problems for stock traders arise when a huge block of stock is swapped from fund to fund; this is not real buying and selling pressure. An even greater problem crept in with the advent of arbitrage programs, whose trades do not necessarily represent supply and demand but minute price differences that are being bought and sold in huge chunks to lock in gains. Futures traders have different problems with volume in that the largest players, commercial firms that have a business reason for trading the derivative, are usually hedging positions. So, they are not taking on speculative positions that represent buying and selling pressures. These hedges also may become spread buyingselling in the same item or spreads between, say, silver and gold, corn and wheat, or live cattle and feeders. Despite the problem, volume indictors have proven their worth, but while it is a good idea to watch the cumulative flow of buying and selling pressure, you should not assign all of this buying and selling to bulls and bears. Combined with other concepts, such as keying off the open, we can focus on something more germane to trading based just on volume, or what some might consider related volatility indicators, such as daily ranges. Futures traders can consider at least one solution to this problem: open interest. Open interest is the number of outstanding contracts in a particular market. Let’s use open interest in the same formula popularized by Granville, but replace volume with open interest (see “Interesting indicator,” below). We can take this solution a step further with the following formula, which incorporates price, open interest and volume: CumulativeSum (Open Interest * (Close - Close.1) (True High - True Low)) + OBV. Let’s break this down into units. The first measure is perhaps the most important, CumulativeSum. It means we will add or subtract a value each day to an ongoing line or indicator. This is not an oscillator.

This is a continual flowing line of accumulation and distribution within the market. The formula is calculating the cumulative sum of open interest times the net change in price, divided by the true range. We then add the OBV value to this cumulative sum. So we first take the net change in price (today’s close minus yesterday’s close) to get a percentage of where within the range the close was. Not all of the activity will be buying or selling; the market “tells” us what percentage of open interest goes to the buy or sell side. Not only that, it also means we are incorporating price and trend change into the formula. What we have accomplished with the formula is to continue to use trend, the direction of the close-to-close change from yesterday. However, we are still unwilling to use all of the open interest on that day. Instead we arrived at a percentage of the range, which is then our multiplier for open interest. In the old OBV technique, both days would have assigned the total volume for the day. The next step in the formula is to then add this value, a combination of price change and open interest into the original OBV formula. This final step combines price, open interest and volume all into one accumulationdistribution line, giving the indicator the full name of Williams POIV AD. While POIV presents a very different view of accumulation and distribution it is used in the same fashion. In basic terms, look for divergences (“POIV times two,” above) shows two examples of this new tool, borne from the stock market, but applied to commodities. In the futures markets, volume is not what it once was. These examples indicate that open interest is indeed a better overall measure, at least for commodities. This has become even truer with the advent of electronic markets. Traders really have a problem these days.

There are two sessions of volume: pit and the electronic session. These can be two different things entirely. The constants are price change, close within the daily range and total open interest. What the Williams POIV AD does is combine all of these into one measure of accumulation and distribution so that we can more clearly see the inflows of money into the marketplace. That understanding also suggests that it’s better to use total volume and total open interest, not just the figures for an individual contract. In “Stocks on the run” (above), you can see how the divergence between this index and price in the S&P 500 has frequently been a harbinger of market rallies. The lesson here is that the indicator works on not only natural resource commodities, but also the financials. What about stocks? Obviously, the results here beg the question of whether what we have learned from the futures markets can be applied to equities. The short answer is that cash equities don’t have a comparable figure for open interest. However, single-stock futures do. Although this analysis has not yet been extended to looking at single-stock futures, there is no immediately apparent reason why it wouldn’t be just as useful. One note of warning is necessary. The Williams POIV AD is a specific formula that compensates for the close within the range relationship, as well telling us how much OI to use, but it is an indicator, not a trading system. In practice, it is useful to confirm a trade or to focus attention on a potential trade. It is not intended to stand as the sole reason to initiate a position in the market.

Hopefully, this index will add a new depth to understanding the daily pattern of buying and selling that goes on in the marketplace. It has a better foundation than what has come before, and that it combines all of the elements of price volume and open interest into one measure, basically an x-ray view, of buying and selling activity and the market place. Options Change in Open Interest. Increase Open Interest. Decrease Open Interest. Stocks: 15 min. delay (Cboe BZX Exchange is real-time), ET. Volume reflects consolidated markets. Futures and Forex: 10 or 15 min. delay, CT. Market Data subject to terms of use and privacy policy. All Rights Reserved. User agreement applies. Barchart. com Inc. © 2018. Stocks: 15 min. delay (Cboe BZX Exchange is real-time), ET. Volume reflects consolidated markets. Futures and Forex: 10 or 15 min. delay, CT. Market Data subject to terms of use and privacy policy. All Rights Reserved.

User agreement applies. This page shows equity options with the largest increase and decrease in open interest from the previous trading session. Open Interest is the total number of open option contracts that have been traded but not yet liquidated by either an offsetting trade or an exercise or assignment. It gives you important information regarding whether there is an active secondary market for the option, and can be used as a tool to predict price trends along with reversals. "Open Interest Change" represents the change in the number of option contracts traded but not yet liquidated. Since options can be bought and sold (with both types of transactions either opening or closing a transaction), it's important to understand what a large change in either direction for open interest may mean. First, it's important to understand that you have no way of knowing whether the change in an option's open interest means the option was bought or sold. An trade can either increase or decrease open interest, so a significant change to this number simply means there are significant changes in traders' positions. When an option has a large shift in open interest, you should look at the shift relative to the volume of contracts traded. When volume is higher than open interest, that typically indicates that trading of the option was high for the day. Also, when an option has a large open interest, there is an active secondary market that makes it easier to trade the option at a reasonable spread between bid and ask. A sharp increase in open interest typically indicates new money coming in, with a continuation of the present trend (up, down or neutral). A sharp decrease, conversely, is an indication that the market is liquidating.

Look for the price trend to come to an end. The page is initially sorted in ascending or descending daily Open Interest Change. You can re-sort the page by clicking on any of the column headings. The number of options displayed is capped at the top 10 for both increase and decrease. In order to be included, an option needs to have volume of greater than 500 and open interest greater than 100. Options information is delayed a minimum of 30 minutes, and is updated once an hour, with the first update at 10:30am ET .



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