#加密市场反弹 Open Interest (OI) refers to the total amount of open contracts in the market at a specific time. It reflects how many buyers and sellers in the market still hold positions and have not closed them. This indicator is very helpful in judging market sentiment, trend strength and potential trend reversals.
The significance of contract open interest:
1. Indicators of market sentiment:
- Increased open interest: This means that more funds are entering the market, indicating an increase in market activity. Typically, an increase in open interest is accompanied by the entry of new participants, which may indicate that the market's confidence in the current trend is increasing.
- Declining open interest: indicates that funds are exiting the market and fewer participants are participating. This may indicate that market sentiment is beginning to become cautious, or that the strength of the current trend is weakening.
2. Determine the trend strength:
- Open interest and price increase together: If both price and open interest increase at the same time, this usually indicates that the trend continuation is strong, the buyer or seller power is increasing, and the trend is likely to continue.
- Open interest and price are falling simultaneously: This indicates that the market is weakening, investors may be taking profits or closing positions, and the trend may be nearing an end.
- Prices rise but open interest decreases: When prices rise and open interest decreases, it means that many traders are taking profits, which may mean that the trend is about to reverse.
- Prices fall but open interest decreases: If prices fall but open interest decreases, it indicates that short sellers in the market are beginning to leave, which may indicate a lack of downward momentum.
3. Identify market inflection points:
Sharp changes in open interest often correlate with turning points in the market. For example, at the top or bottom of a trend, open positions usually increase significantly because market participants are more sensitive to current market price changes and will increase their position layout. If the market price fluctuation direction no longer follows the changes in positions at this time, it may mean a turning point in the trend.
How to assist trading based on contract open interest data:
1. Trend confirmation:
When both price and open interest increase at the same time, it is usually a signal of trend continuation. If you see a steady increase in open interest during an uptrend, it indicates that bulls are strong and you can consider continuing to hold long positions.
2. Observe the turning point:
When the open interest in the market reaches an extreme value and the price begins to slow down or pull back, it usually means that the market may be approaching a turning point. For example, in a long-term rising market, if you see that the price is still rising but the open interest is obviously reduced, it may mean that the longs have begun to close their positions and take profits, and the market may be about to reverse.
3. Determine market activity:
High open interest means that the market is active, liquid and suitable for trading. On the contrary, low open interest may mean that the market is relatively quiet, there may be greater price slippage, and increase trading risks. Therefore, the contract open interest is also an important factor in choosing to enter a certain market.
4. Combined with other indicators:
- Volume: It is more effective to use the combination of position volume and trading volume. If trading volume increases but open interest does not change significantly, it may just be a short-term fluctuation. Conversely, an increase in volume and open interest together indicates a strong trend.
- Divergence between price fluctuations and open interest: When there is a divergence between price and open interest, such as price rising but open interest decreasing, it may be a potential reversal signal.
5. Short-term trading opportunities:
For short-term traders, when the position suddenly increases significantly, it may be accompanied by large fluctuations, providing short-term trading opportunities. Paying attention to the sharp changes in position can help you grasp the rapid changes in market sentiment and adjust your trading strategy in time.
Practical application:
- Observation of open interest in the long market: In the upward trend of the market, if the open interest increases as the price rises, it means that more funds are chasing the rising market, indicating that the upward momentum is strong, and you can consider continuing to hold the position.
- Short market open interest observation: During a downtrend, if open interest increases as prices fall, it indicates that bears are applying further pressure and may exacerbate the downtrend.
- Closing signal: After the open interest reaches a certain peak, especially when price fluctuations slow down or diverge, it may be a signal that the trend is about to reverse. At this time, you need to carefully consider whether to close the position.
Summarize:
- An increase in open interest usually means that the market is active and the trend may continue.
- Declining open interest indicates that market participants are starting to exit and the trend may weaken or reverse.
- By combining the open interest with the price trend, it can help determine the strength of the trend, market sentiment and potential trend turning points.
