Been trading for a while now but still get confused about volume versus open interest numbers.
Both metrics are on my trading app but I am not sure which one matters more. Volume changes throughout the day while open interest is more stable.
Do you look at both or focus on one? High volume and low open interest makes me wonder if there is an issue.
Volume shows how active the market is right now, while open interest tells you how many contracts are still out there. I watch both since they do different things.
High volume + rising open interest = new money coming in, strong trend. High volume + falling open interest = probably a reversal since people are closing positions. Low volume + high open interest = everyone’s waiting.
This video explains it really well:
Keep it simple. Use volume for entry timing, open interest for trend strength.
Volume’s better for quick trades - shows what’s happening right now. Open interest works for longer positions since it reveals how committed traders are to price moves.
Volume spikes with flat open interest? Traders are flipping positions fast. Not necessarily bad, just means choppy conditions.
Stick with volume for mobile trading. Updates faster and helps time your entries.
Made a huge mistake last month ignoring open interest completely. Saw massive volume on a call option and jumped in thinking it was bullish momentum.
Turns out open interest was dropping hard. People were closing positions, not opening new ones. Lost 40% because I only looked at volume.
Now I check both. Volume without rising open interest is usually a trap in my experience.
I look at volume for immediate trends and use open interest for longer moves.
Open interest data’s always a day behind on most platforms. Volume updates in real-time.
Use both:
• Volume confirms legitimacy of breakouts
• Open interest indicates position building
High volume with low open interest means day traders dominate. Check the underlying asset’s volume too.