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Last active November 27, 2025 03:06
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How to Interpret Open Interest (OI) and Price: A Trader's Cheat Sheet
Price Action OI Change Interpretation/Bias Correlation Color Histogram is Smaller (Weaker Flow Momentum) Histogram is Bigger (Stronger Flow Momentum)
Rises Green Bars 🟒 Strong Bullish / Long Confirmation (New money is entering on the long side, confirming the uptrend) 🟒 (Bullish) Momentum is weakening. New capital inflow is slowing down; the rally is losing intensity. Momentum is strengthening. New capital inflow is accelerating; the rally is gaining intensity.
Rises Red Bars πŸ”΄ Weakening Bullish/Short Signal (Current rally based on short covering; uptrend unsustainable) 🟠 (Bearish) Liquidation pressure is easing. The rate of money leaving (selling) is slowing down; could signal consolidation or reversal. Liquidation pressure is intensifying. The rate of money leaving (selling) is accelerating; correction is deepening.
Falls Green Bars 🟒 Strong Bearish/Short Confirmation (New money is entering on the short side, confirming the downtrend). 🟠 (Bearish) Momentum is weakening. New short capital inflow is slowing down; the sell-off is losing intensity. Momentum is strengthening. New short capital inflow is accelerating; the sell-off is gaining intensity.
Falls Red Bars πŸ”΄ Weakening Bearish/Long Signal (Downtrend based on long liquidation; downtrend unsustainable). 🟒 (Bullish) Covering pressure is easing. The rate of money entering (covering) is slowing down; bounce may be ending. Covering pressure is intensifying. The rate of money entering (covering) is accelerating; strong rebound or short squeeze underway.
Sideways Green Bars 🟒 Accumulation/Distribution (Smart money is building a position). Look for breakout confirmation. Varies Low conviction consolidation. Slow net flow indicates a lack of aggressive participation. Aggressive accumulation/distribution. High net flow suggests smart money is taking aggressive positions for an imminent, high-conviction breakout.
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