I try to educate myself in DOM and Tape reading, which I want to use to refine my entries, and in this thread I noticed that bloom wrote it's a big difference if big players are covering or entering the market. It made me think about it and something came to my mind. I think that open interest indicator could be an interesting tool here, as it's the total number of open contracts on a security. Open interest measures the flow of money into a market. For each seller of a futures contract there must be a buyer of that contract. Thus a seller and a buyer combine to create only one contract. Therefore, to determine the total open interest for any given market we need only to know the totals from one side or the other, buyers or sellers, not the sum of both.
If both parties to the trade are initiating a new position (one new buyer and one new seller), open interest will increase by one contract.
If one trader is opening a position and the other one is closing, OI remains unchanged.
If both traders are closing an existing or old position (one old buyer and one old seller) open interest will decline by one contract.
But don't know how I could interpret this information for now. Would big volume forming at a support or resistance with falling open interest mean there is no move going to happen, because money is flowing away from the market? What do you guys think? I'll be grateful for any response.
I thought if there was a source of intraday OI, which I don't know if there is, that it could be used the way I described before. And it was actually a question, I was asking if we were coming up or down to a resistance/ support and OI would be decreasing if it meant money is flowing away from the market and therefore we can't expect any bigger move until new money comes later. If you have experience trading daily charts with OI, does it work like that in there? And yes, if you are right as for OI releases, I am a bit off topic here. I just thought if there is intraday volume, then why not OI.
I must apologize for this type of interpretation ( enter or exit). I reconcider many things from time of starting this thread. Than i started this thread i want to sahre my expirience and learn some new. So lets get to the topic. You need to KNOW only the actions which are agressive and move price. It could be ENTER or EXIT form position. All you need is to know agressive this action or passive. As more agression comes to market prices mowe very fast. Find this agression. Than you need to see that pros defending positions. If they were buying and move price higher than you need to see how they HOLD bid ABOVE price they ENTER. If you see such type of behaviour than you can say there were ( with some probability) ENTERING. Everytime somebody enters and exit and a thing whish matters alot is Which action is agresive
As you see big prints you understand that at this actual price some big guy doing something. You can say were this enter or exit after market testing the price at which you have saw big prints. For example - you see large BID prints at 1640 while price is moving down
1640 - 500
1640 - 1000
1640 - 200
1640 - 400
You can say there was HUGE bid also THERE was huge market Sell order. Both of them represents BIG transaction at 1640. After that price quickly going up at 1642. So what just happened in front of your eyes? 1640 big guy sell to BID but hi is not holding the offer after that. He is not protecting his position at the offer below or near 1640. In that case there is no short position he holds. So what does mean this HUGE sell market order? Probably Stop run of some guy who were long and took his loss. This is the first step.
After that you need to understand that another Pros SEE THIS actual situation. SO what they will do? If you will see how BIG offer limits begans to appear at the LEVELII or in the DOM what will happen next? And what will happen after if there will appear BIG bid Limits? Remember this situations and find them again and again. Only practice will show you the right way )))
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