how to use open interest

by Prateek garg 👇

Open Interest  the term you generally hears on Business news channels, What is that ?

 Change in open interest talk about the traders view what they assumes about the market that where the stock price will go in near future....

How it will works ?

                                                            figure 1  (image sources NSE  )

As you can seen in the figure1 , a list of securities with CMP(current market price ) , change in open interest and value of the turnover.

check the following details 

1. price rise with the change in open interest 
2. price decline with the change in open interest 

if the price change is significant then you should make the point from what level it takes turnaround which act as your stop loss for the trade . 

let us take an example 

figure 2 ( image source NSE )

       

     SRM transport 

    Change in open Interest -               14 %

    Change in price               -           -3.13 % 

it clearly depicts that stock tends to decline , so you have to make an short with an stop loss of  1128 

( from where make turnaround ).

Note : traders should always maintain discipline in every trade if your SL triggers close the position.

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