“Open interest is the number of players coming into the room and if they’re not coming in, it means the restaurant is out of food.”
— Larry Pesavento
Open interest is the total number of futures contracts that remain unsettled at the end of each trading day. Changes in open interest, used in conjunction with price and volume, can provide valuable information to traders.
Currently, we’re seeing a rising stock market with falling volume and open interest. This is akin to people leaving a restaurant because they’re out of food.
This information doesn’t guarantee stock prices will fall from here. But it is not a bullish sign, and advises you to exercise caution.
A key reason we are able to successfully apply ancient Japanese charting techniques in today’s markets is that the information available today is what was available then: price, volume, and open interest.
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