In crypto, especially when trading shit coins, measure OI on BTC, ETH, and any other asset that has futures up against whatever you are trading.
Most importantly identify positive or negative correlation between the asset pair and TRADE accordingly.
i.e. if you are measuring OI for USDX or DXY know that it will have negative correlation toward your risk asset whatever it is.
Open Interest and Volume ARE NOT THE SAME THING!
Volume is the measure of contracts settled in a trading session (hourly, daily, monthly, etc.)
Open interest (or OI for short) is the total number of contracts still outstanding.
OI and order wall size are correlated.
OI is charted.
Increasing OI means an increase in liquidity i.e. open contracts.
Decreasing OI means that there is a decrease in liquidity i.e. liquidity is leaving the market either cash or asset.
Open Interest can help you identify trend shifts. Use it along with order flow the compliment each other.
OI Rising - Market trends up - Volume increasing - Trend will continue
OI Falling - Market trends up - Volume decreasing - Trend will turn bullish
OI Rising - Market trends down - Volume rising - Strong bearish continuation
OI Falling - Market trends down - Volume falling - Bearish bias is lessening
Notice in the above simplified examples that volume MUST be paired with OI to be useful.
One might mistake that volume on it's own can be used to judge trends.
Open interest will increase as more traders enter the market which means often that money is coming into the market.
OI will decrease as traders exit the market or as contracts are closed. This means that money is leaving the market i.e. less buyers
Most importantly identify positive or negative correlation between the asset pair and TRADE accordingly.
i.e. if you are measuring OI for USDX or DXY know that it will have negative correlation toward your risk asset whatever it is.
Open Interest and Volume ARE NOT THE SAME THING!
Volume is the measure of contracts settled in a trading session (hourly, daily, monthly, etc.)
Open interest (or OI for short) is the total number of contracts still outstanding.
OI and order wall size are correlated.
OI is charted.
Increasing OI means an increase in liquidity i.e. open contracts.
Decreasing OI means that there is a decrease in liquidity i.e. liquidity is leaving the market either cash or asset.
Open Interest can help you identify trend shifts. Use it along with order flow the compliment each other.
OI Rising - Market trends up - Volume increasing - Trend will continue
OI Falling - Market trends up - Volume decreasing - Trend will turn bullish
OI Rising - Market trends down - Volume rising - Strong bearish continuation
OI Falling - Market trends down - Volume falling - Bearish bias is lessening
Notice in the above simplified examples that volume MUST be paired with OI to be useful.
One might mistake that volume on it's own can be used to judge trends.
Open interest will increase as more traders enter the market which means often that money is coming into the market.
OI will decrease as traders exit the market or as contracts are closed. This means that money is leaving the market i.e. less buyers
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.