Nifty future analysis with volume and open interest

A new analysis for Trading Nifty Future, traders must know what is relation between open interest and trading volume. Today I will explain this with a tutorial, now for open interest you can refer to open interest article. Once you are clear with open interest we will continue with its relation to trading volume.

How is volume important?

Now according to Dow Theory, when ever markets start to build up trends volume is highly watched as it directly reflects traders (speculators) and investors participation in the market. This move continues till we see fading of the current trend or when there is some unexpected change in fundamentals. In technical analysis trading volume always precedes price of underlying, so looking at these volumes one can predict that trend is weakening and may reverse. For trading with volume you must always remember these points:

  • When volume is high – Trend is likely to continue.
  • When volume is low – Trend may reverse / Pullback.

Now let me show you how you can relate trading volume, open interest and price action. For this you need to have your concept of open interest clear.

Follow the cheat sheet to get clear idea of open interest, volume and price action:

Volume Open Interest Price Action Conclusion
Rising Rising Rising Strong Market
Falling Falling Rising Market Loosing Strength
Rising Rising Falling Weak Market
Falling Falling Falling Market Gaining Strength

So next time, when you are trading nifty future remember to look at nifty future trading volume and open interest of nifty future. Traders, the open interest we are talking about is of nifty future and should not be misunderstood with nifty options open interest. Friends add your comment below or join us on Facebook and Twitter.

About Bhaveek Patel

Bhaveek Patel is a technical analyst and investor, his areas of interest includes stock market, forex, gold.

Comments

    • says

      Sir, for nifty future price action and volume you can see it on eod charts. But for open interest you need to go manually to nse website. I am also working on data source to prepare a EXCEL sheet that will display this data together.

      Regards,
      Bhaveek Patel

  1. Darshan Sharma says

    Bhaveek you are working on excel sheet, can you share it once it is done. I am keen to know open interest on single page.

  2. parag malkan says

    at what percentage level can we confirm …long unwinding…long build up…..short covering….short build up

    • says

      Hi Parag, Change in open interest is mostly seen when stock / index trades around a support resistance level or when it is ready for a breakout. At such levels if you see much bigger change in open interest then that can confirm you of a direction using volumes open interest and trend correlation. I don’t see percentage level helps to do so.

      Let me share an example: If nifty is trading up today, open interest also up and volumes in market also up, then we conclude that long positions were added to nifty future. It has noting to do if open interest jumps 5% or 10% or 20%. But higher the open interest we say more traders are taking long side positions in nifty future.

      Parag let me know if you need any help from me.

  3. ajay says

    Dear Sir,

    kindly request how to see openinterest for nifty future and option trading and Kindly send me Excel based trading Software om my email id

    thankyou.

  4. sanjay says

    Sir, I want watch price volume and open interest of stock. Where I can see these online at market hours. Is these are in your excel sheet, If yes please send me in my email. I am intraday trader. Thanks

  5. Ajay says

    Sir,

    Pl send me the excel sheet and further inputs on how to trade futures by openinterest , volume and price action

  6. RAJNEESH KUMAR SINGH says

    Dear Bhaveek,

    Could you please send me the excel trading software to me as well.

    Thanks in advance.

  7. Muhammed Raza says

    Dear Bhaveek Patel,

    I have a query, this is understood that if along with OI and Vol increases, market is Bullish.
    My question is, what if (OI of Put) increases along with (Call Price) but volume of both (Call and Put) are on a decline?

    What i want to say is, there is a traditional interpretation of OI, that OI and Vol are always in sync. What if its not.

    Kindly enlighten me.

  8. singaramani says

Trackbacks

  1. […] In the month of September 2013, after the nomination of Shri. Narendra modi as BJP’s PM candidate we have seen markets getting stronger. Market participants started expecting NDA will form govt at center. As the the exit polls were out, we saw markets creating new all time high, ahead of actual results. On the day of results declaration, we saw nifty touching all time high of 7600, but in last few trading hours most of those gains were given up. We saw tremendous increase in long positions in many index heavy weight stocks, also nifty future was seen adding long positions to its Open Interest. […]

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