How Does the ‘Open Interest’ in a Futures Contract Indicate Market Sentiment?

Open interest (OI) is the total number of outstanding contracts. Rising OI alongside a rising price suggests strong buying pressure and confidence in the upward trend (bullish sentiment).

Rising OI with a falling price suggests strong selling pressure and confidence in the downward trend (bearish sentiment). A falling OI indicates traders are closing positions, suggesting a potential trend reversal or consolidation.