Market Insights
By Walter Pehowich
Open interest is an indicator often used by traders to confirm trends and trend reversals for both the futures and options markets. Open interest represents the total number of open contracts on a commodity, meaning one buyer and one seller. Trade volume and open interest is a powerful tool used by traders to predict market trends and it’s my favorite tool to predict future market movement.
Used in conjunction with open interest, volume represents the total number of contracts that have changed hands in a one-day trading session in the commodities or options market. The greater the amount of trading during a market session, the higher the trading volume. The greater the volume, the more we can expect the existing trend to continue rather than reverse.
So now that you have an understanding of what open interest is, I’ll start my story.