Technical Note｜$Q ｜15-minute open interest +1.75%｜Price -7.14%
Definition: Every new position added to open interest necessarily has someone taking the long side and someone taking the short side. So the idea that “a sharp rise in open interest means bullishness” is a common misconception.
As for how to read it: rising prices with falling open interest are often seen as being driven by short covering, while falling prices with falling open interest are generally understood as longs exiting via stop-losses. These are ways of interpreting the data based on experience, not definitive conclusions.
Understanding this indicator helps you avoid being spooked by the numbers; it’s not a tool for pinpointing market tops and bottoms.
Definition: Every new position added to open interest necessarily has someone taking the long side and someone taking the short side. So the idea that “a sharp rise in open interest means bullishness” is a common misconception.
As for how to read it: rising prices with falling open interest are often seen as being driven by short covering, while falling prices with falling open interest are generally understood as longs exiting via stop-losses. These are ways of interpreting the data based on experience, not definitive conclusions.
Understanding this indicator helps you avoid being spooked by the numbers; it’s not a tool for pinpointing market tops and bottoms.