🤔💡 Let's talk Open Interest (OI) – something I ignored for too long, costing me dearly early on. OI isn't volume; it's the total number of open contracts, showing new money entering or leaving the market. Rising OI means new positions are opening, confirming strength in the current trend. Falling OI means positions are closing, suggesting trend exhaustion.
Now, combine with price:
1. **Price Up + OI Up:** Strong bullish conviction. New buyers are joining the rally.
2. **Price Up + OI Down:** Rally likely on short covering, not new demand. Weakness developing.
3. **Price Down + OI Up:** Strong bearish conviction. New shorts are initiating.
4. **Price Down + OI Down:** Downtrend fueled by long liquidation. Weakness developing in the bear move.
A practical signal: Always look for OI to...
Now, combine with price:
1. **Price Up + OI Up:** Strong bullish conviction. New buyers are joining the rally.
2. **Price Up + OI Down:** Rally likely on short covering, not new demand. Weakness developing.
3. **Price Down + OI Up:** Strong bearish conviction. New shorts are initiating.
4. **Price Down + OI Down:** Downtrend fueled by long liquidation. Weakness developing in the bear move.
A practical signal: Always look for OI to...