Online Trading Concepts

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Interpreting Open Interest

Open Interest

  1. Open Interest Basics
  2. Interpreting Open Interest

Open Interest is a helpful tool in analyzing the strength of a price move. There are four main interpretations of Open Interest:

The chart below of the Dow Jones Industrial Average mini-Dow futures contract illustrates two examples of price increases with corresponding increases in open interest:

open interest can confirm price movements

In the chart above of the mini-Dow future, there is a strong increase in price with an equally bullish strong increase in open interest.

Notice that after the first sharp run up, open interest decreased during the price retracement. Seemingly, there was not much strength behind the price decrease.

The second strong bullish green candle occured with a sharp increase in open interest, interpreted as a strong bullish signal that price increases might occur in the future.

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