Open Interest vs. Trading Volume
Basis |
Open Interest |
Trading Volume |
---|---|---|
Definition |
Open interest refers to the total number of outstanding contracts held by market participants at the end of each trading day. |
Trading volume represents the total number of contracts or shares traded during a specific period, such as a trading day. |
Timimg |
Open interest is measured at the end of each trading day and represents the cumulative total of all open contracts at that time. |
Trading volume reflects the number of contracts or shares traded throughout the trading day, providing a snapshot of market activity during that period. |
Interpretation |
Increasing open interest suggests growing market participation and interest in a particular financial instrument, potentially indicating new positions being established. |
Higher trading volume indicates greater buying and selling activity in the market, reflecting increased investor interest and participation. |
Role in Analysis |
Used to gauge market sentiment, potential support or resistance levels, and to confirm or contradict price trends observed in price and volume data. |
Helps confirm price trends, identify potential market reversals or breakouts, and assess the strength or weakness of price movements. |