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.
{ 11 comments… read them below or add one }
Thank you sir,….but, where can i get all this Nifty fut: data…?
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
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.
IF ANYONE IS INTERESTED IN EXCEL BASED TRADING SOFTWARE U CAN MAIL ME.
Dear Sir,
Kindly send me Excel based trading Software om my email id xxxxxxx@gmail.com
Nadeem sir, mail has already been sent kindly check.
Regards,
OurNifty.com Support Team.
Dear Bhaveek,
Could you please send me the excel trading software to me as well.
Thanks in advance.
Regards
Karuna
at what percentage level can we confirm …long unwinding…long build up…..short covering….short build up
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.
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.
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