Volume and Open Interest
Chapters in this video
- 0:00 Volume vs open interest: the poker game analogy
- 1:11 Why heavy volume can run with flat open interest
- 2:31 How open interest changes: new buyer meets new seller
- 3:00 Both sides offset: open interest falls
- 3:54 The hot potato transfer: open interest unchanged
- 4:47 Confirming a price trend: the winning trifecta
- 5:47 Falling open interest on a rally: short covering trap
- 7:10 Rapid-fire exam recap
What this video covers
- Why volume counts contracts traded in a single period while open interest counts outstanding contracts that carry forward
- How a session can post massive volume with flat open interest when traders pass existing contracts rather than create new ones
- The three arithmetic rules for open interest: rises when both sides are new, falls when both sides offset, unchanged when one side simply transfers
- Why open interest does not automatically rise just because a new buyer enters the market
- The winning trifecta of rising price, rising volume, and rising open interest as confirmation of a healthy trend with real conviction
- Why rising price on falling open interest signals short covering rather than fresh buying, and why the exam calls this suspect
- The exact wording the exam uses to bait you into selecting a "healthy rally" on falling open interest, and how to spot the trap
Read the full lesson, free
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