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Open interest is one of the most popular indicators for identifying and confirming trends. It is also known as Open Commitments and Open Orders. Open interest is widely used by futures and option traders; it can also be applied to stock trading.

Open interest is the total number of outstanding derivatives contracts at one point of time. In other way, it is the total number of futures and options contracts which are not expired, exercised or settled by delivering underlying instrument. In stock market, it is the number of buy orders on market opening. Open interest of a one day is disclosed by markets at the end of the trading day as a comparison of previous days open interest; it can take both positive and negative values. Many traders mistake open interest with volume of trade; open interest only includes open positions where as trading volume include both open and closed positions of a trading day.

Open interest is a powerful yet simple trend indicator when used in conjunction with price and volume indicators. In general, rise in price and open interest indicate an upward trend, while fall in both indicate market consolidation. Rise in price and fall in open interest indicate weakening of an upward trend. Fall in price and rise in open interest indicate a weak market. Sudden rise or fall in open interest usually indicates volatility increase in near-future.

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