As traders or speculators in the fu- tures markets know, the most primary and profitable of goals is to understand what makes the market move now. In other words, how is the smart money re- acting to the market? The classic method of determining current market sentiment is through tracking volume and open in- terest. Volume, the number of contracts traded during a trading session, and open interest, the total of all unclosed po- sitions at the end of a trading session, have been used as technical indicators of market trends for over years!

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Revised Edition. Professional Publishing'". All rights reserved. No part of lhis publication may be reproduccd, stored in a retrieval system, or transmincd. This publication is designed to provide aceurate and authoritative information in regard 10 the subject matter covered.

It is sold wilh the underSlanding that neither the. Times Mirror. Higher Education Group. Library of Congress Cataloging-in-Publication Data. Kennern H. Volume and open interest I Kennelh H. IncIudes bibliographieal referenees and index.

ISBN 1. Futures market -United States. Investment analysis. U6S48 Foreword to the First Edition iv. Foreword to the Second Edition v. Rationale 1. Volume 3. Open Interest General Rule for a Healthy Price Trend Developing a Disciplined Approach Specialized Problems Idiosyncrasies to the General Rule Specific Market Behavior Commitments ofTraders Report Support and Resistance Case Studies Twenty-Four-Hour Trading The Data Practical Exercises Glossary Historical Overview Basis Mathematically Detrending Open Interest Seasonally Normal Commitments Reporting Levels This book will relate the three variables of price change, volume level, and open interest fluctuation.

The result will produce the direction of the major price trend and a reading of that trend's strength. In many examples, a elassical bar charting.

A technical approach to the analysis of any organized market uses volume as an important input. The technical form that best lends itself to analysis of volume and open interest is the daily high-low-elose bar chart of a futures contract. Volume and open interest changes should be important to all categories of market participants: short-term traders, foreign-exchange dealers, hedgers, and position traders. The first years of wheat fu tures irading on the Chicago Board of Trade evolved with charts showing only volume and open interest plotted below prices.

One consequence of this increased use of mathematical tools is the demand for physical space on the screen or hard copy printout. This has occurred at the expense of volume and interest data. Purveyors of the new analytical models do realize that a plot of volume and open interest must be incIuded somewhere in the technical "toolbox. But the sensitivity of the scales on most default screens is abominable. Another reason that analysis of volume and open interest has been receiving less attention is the increasing complexity of the fu tures day.

When does it start? When does it stop? How should all this data be organized? The basic application of the theory has not changed. The first 13 chapters of the original edition have been tweaked when necessary and additional examples added. Indeed, that is the raison'. Ken Shaleen. March 7, Ideal Bull Market: Price vs. FoHowed by a Price. Catalog of Charts. Worksheet with Analysis and Summary. D-Mark, Sept ' "Outcome". Mathematical Determination of Volume Parameters. Right- and Left-Hand Scales.

T- Bill and Eurodollar Expiration Card. Hedge vs. Speculative Market. Answer to Quiz Question. Options on T- Bond Futures. Eurodollars, Mar ' Outcome. T- Bonds,. Actual Open loteTest Curves. T- Bonds, Year-End Phenomenon. Benchmark Prices. Support was Successfully Te sted.

D-Mark, Mar ' Outcome. Equity Market: Typical Newspaper Headline. Key Reversal Days. Gold, April ' The Next Day. Gold, April ' Conclusion. T- bonds, Dec ' Va lid Upside Breakout? T- Bonds, Dec ' "Outcome". Swiss Franc, Sept ' Data Sheet. Holiday Trading. British Pound, Mar ' Record Volume? T- Bonds, Dec ' Graphie Answer. T he fundamentals of supply and demand make a market move higher or lower in the long run.

This is because many decisions are psychological judgments-based upon hopes, fears, greed, moods, and the like. Volume and open interest can identify how traders are reacting to changing conditions. The strong hands are deemed the "smart money. Critics of technical analysis have a myriad of reasons. One comrnent often made is: The underlying cash, or spot, market is the dominant market; therefore, why should the futures market, a derivative, be analyzed?

This is a valid question and merits a response. The difference between a cash market price and a futures price is the "basis. Accurate statistics are difficult, if not impossible, to obtain in an over-the-counter market. For instance, what was the tumover volume in spot dollar-mark dealing in the U.

Since data availability is not timely, an exact answer is not possible. However, tumover figures are important inputs to a technical approach.


Kenneth Shaleen - Volume & Open Interest (Rev. Ed.)






Kenneth Shaleen - Volume & Open Interest




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