Explaining open interest in simple terms …
#OpenInterest is a measure of the number of outstanding #derivative contracts in a particular market.
#OpenInterest is a measure of the number of outstanding #derivative contracts in a particular market.
It reflects the number of contracts that have not been closed or settled, and helps to show the level of activity in a market.
When open interest increases, it can indicate that new #money is entering the market.
When open interest decreases, it can indicate that traders are closing out their positions.
Open interest can also be used to gauge the strength of a #trend. If open interest is increasing while price is moving in the same direction, it can suggest that the trend is gaining #momentum.
However, if open interest is increasing while price is moving in the opposite direction, it can indicate that traders are betting against the trend.
Open interest is different from volume, which measures the number of #contracts that are traded in a particular period.
Open interest is a lagging indicator, meaning it reflects what has happened in the past.
It is important to consider open interest in conjunction with other indicators, such as price and volume, to get a full picture of market activity.
#Traders and investors can use open interest as a way to gauge sentiment and potentially identify potential market turning points. #Trading #Futures #Options #Derivatives
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