Download TRACK `N TRADE PRO

Using Indicators
VOL/OI –Volume/Open Interest
Introduction
Volume is a measurement of the number of contracts traded in a
day. It is a sign of market activity. Open Interest is the number of
contracts outstanding or those held overnight. This is a measure
of market participation. In liquid markets these numbers will be
consistently higher than in a thin or illiquid market. These numbers
are always a day behind, because it takes the exchange that long
to tabulate these figures. When displayed Track 'n Trade offsets
these values to put them beneath their respective data in the
chart, consequently there is not a value for either volume or open
interest for the most recent day of any contract. Volume and Open
Interest indicate participation and urgency. This tells the trader
which market is the correct one to be in based on its participation.
Interpretation:
Volume measures the number of contracts that changed hands
during that trading session. This indicator of market activity can
show whether trade was heavy or light. That will give you an idea
of the possible volatility present in that market.
Contracts that have not been settled at the end of the day are
represented by open interest. New buyers and sellers entering or
exiting the market change open interest.
The key to this indicator is to look at volume as a percentage of
open interest. VOI does not give straight buy or sell signals or
have set trading rules. Rather it shows the cyclical tendencies of
the market. The flow of the underlying market can be represented.
Looking at VOI shows whether new buyers or sellers are entering
the market or if they are liquidating positions.
There are basic common sense rules for this indicator. Prices are
up and VOI is increasing, the market is strong. Prices are up and
VOI is declining, the market is getting weaker. Prices are down
and VOI is rising, the market is getting weaker. Prices are down
and VOI is declining, the market is gaining strength.
In bull markets, volume tends to increase during rallies, and tends
to decrease on reactions. In bear markets, volume tends to
increase on declines and decrease during rallies. Trading volume
usually increases dramatically at tops and bottoms.
Look at volume and open interest will show you which contract
month to be in. When looking at trading a specific commodity it is
important to know which contract month to be in. Commodities
expire or are delivered several times a year. This creates a
situation where traders are constantly "rolling over" from one
contract month to the next. This means that traders need to know
Track ‘n Trade Pro 4.0 User Manual
181