Thread by @indraziths

A 'Stethoscope' will not Make a Normal Person a Doctor.

Similarly, an 'OI Tool' will not Convert a Normal Person into a Successful Trader.

One Should Know the Right Way of Using It.

Debunking the "Myths" related to Open Interest!

Thread 🧵🧵
#openinterest #OI
(1/N)

#1 OI is Not An Indicator

Price Action consists of 'Price' & 'Volume'.

'Volume' is a measure of Market Activity, but not Liquidity.

'OI' measures both Market Activity and Liquidity!

So OI is better than Volume.

Hence, OI is a part of the Price Action.

(2/N)

#2 OI is Not a Holy grail Concept

Open Interest helps to identify the direction thought by the big players.

But one has to prepare his own rules for trading.

Hence, don't assume you will become a successful trader just by using OI!

(3/N)

#3 OI Don't Provide 'Entry' or 'Exit'

OI indicates the position of big players.

But one has to identify their 'Entry' and 'Exit' points based on Price Action or Indicators.

Only 'Entry' and 'Exit' decide your trade's fate!

(4/N)

#4 Not a Good Idea to Use OI on Friday Morning

After the weekly expiry, Friday morning, big shots will be busy accumulating their long/short position.

So don't assume any direction by looking at OI data on Friday morning.

(5/N)

#5 Don't Rely on OI Data Between 9.15 AM to 9.45 AM

The exchange sends data every 3 minutes.

So, there will be a little delay in OI data at open, and also some big players will be accumulating the positions.

So rely on OI data only after 9.40-9.45 AM.

(6/N)

#6 OI Integration

Integrate OI with a trading system (either Price Action or Indicator Based) to get better results.

Use OI to get the direction and technical concept for Entry, Exit, and Position Sizing.

(7/N)

#7 OI Helps to Know the Direction

I had a bearish view of Banknifty from the open. I took a few short trades (shared live on my Telegram Channel).

The reason? OI Data!

Observe the image carefully!

(8/N)

#8 OI Helps to Hold the Trade

OI clearly said bears were controlling the market yesterday.

So, based on my system, I took a short trade at 10.50 AM.

Then I started to observe the reversal in both the Price Action and OI charts.

(9/N)

My Target was 38505.

- Call OI kept on increasing.
- Put OI kept on decreasing.
- Call OI interpretation was bearish.
- Put OI Interpretation was bearish.

So, it gave me the confidence to hold the trade until it reached my target.

(10/N)

#9 Delay of 3 Minutes

Many people claim a 3-mins delay in OI data is a big disadvantage for traders

In my opinion, this "3-min delay" is for everyone (correct me if I am wrong here), so it is the same game for everyone!

I also check price for exit, so there is no issue

(11/N)

#10 Decide your Timeframe

Before using OI, one should have clarity on what timeframe they are trading.

Don't jump into scalping just because someone is making money in scalping using OI.

For me, 15-mins with important levels from the daily chart works better.

(12/N)

#11 - Options Buying vs. Options Selling

- Time decay works against options buyers and works in favor of option sellers

- Pick ITM if you are an options buyer

- Most Options traders ignore the impact of "Delta", explore it!

(13/N)

#12 Price Action + OI = Deadly Combo

From my experience, when we combine 'OI' with 'Price Action' it becomes a deadly combo! Explore it

(14/N)

#13 Take Responsibility

Never ever blame someone or something for your losses.

You will always find someone/something to blame.

Instead, take responsibility for your actions, and then only you grow as a trader!

(15/N)

By any chance, if you read this thread on OI and if you don't know anything about OI, then please read this article to learn more about OI.

profiletraders.in/post/the-power…

If you like this useful information, please #retweet and share it with your friends 😃😃

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Have a nice weekend!

This is yesterday