The volume of open positions on the futures contract.
Appearance of the indicator.
Open interest is the sum of open contracts on a futures contract. Each open in long contract corresponds to an open in short contract. The data comes directly from the exchange.
Open interest indicator.
In addition to the candlestick chart, Open interest has 2 alternative forms of display:
Open interest delta - is a histogram, which takes values of changes in open interest. In addition to the histogram, the standard deviation and 2 types of moving averages are calculated for positive and negative changes, respectively.
Open interest delta.
The Open interest spike displays abnormal spikes of Open interest on the chart. Positive spikes are highlighted in green ("money in"), negative spikes are highlighted in red ("money out"). The indicator uses Z-score estimation, thus the model adjusts to changing market conditions, which allows it to work in any market conditions. The spike indicator has one parameter to change - the filter, which takes values from 1 to 5. The larger the filter values, the more abnormal spikes will be highlighted.
Open interest spike.
The sum of open positions or Open Interest(OI) is a technical indicator whose value is equal to the number of active futures contracts, such as futures and options, which have not been settled yet. In simple words, it is a tool that reflects in real time the total number of ALL open derivative positions held by market participants, no matter in which direction.
It is determined by adding the number of all open trades and then subtracting the number of all closed trades from that number.
For example, if there is an increase in open interest in BTC futures at the same time as a slight increase in the BTC exchange rate, it usually indicates a continuation of the uptrend. Conversely, a decrease in open interest in BTC futures during a small correction in the BTC price usually indicates an emerging downtrend.
A simultaneous increase in open interest and price indicates an active upward market movement. However, if the price is rising and Open Interest is declining, it indicates that the market's upward movement is weakening. Decrease of both open interest and price indicates the phase of market consolidation. And vice versa, a decrease in price, accompanied by an increase in the number of open orders, indicates market weakness.
The Open Interest indicator by itself does not give a trading advantage. But in combination with other indicators, such as Price, Volume andVolume Delta, it allows estimating the prevailing moods of market participants, both large and small.
Patterns that can be indicated by OI indicators to confirm the current trend and detect the potential for a trend change: