I’ve been exploring open interest data recently. It seems important, but I’m unsure how much it influences my trades.
Some people swear by it while others say to disregard it.
Is this information useful in making entry decisions? I might be overlooking something.
Open interest can indicate where significant money is situated before executing trades. High open interest at specific strike prices often serves as support or resistance.
It’s crucial to monitor changes in open interest with price trends. If open interest rises as the price increases, it typically signals new buying interest.
Using it together with volume data can enhance entry timing more effectively than relying on price action by itself.
Open interest data shows market positioning at specific levels.
Key points:
• High OI creates support/resistance zones
• Rising OI + price movement = trend strength
• Declining OI = position unwinding
Use it to avoid crowded trades and identify liquidity pockets.
Three months back I ignored open interest completely and got burned on a EURUSD trade.
There was massive open interest at a key level but I didn’t check it. Price hit that exact spot and bounced hard against me.
Now I always peek at open interest before entering. It shows me where the big money is sitting and helps me avoid walking into walls.