Posted by forex at 12:47 AM
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1. Review the definition of market sentiment. Market sentiment refers to the factors in the market which drive price changes. It is often used by fundamental analysts to gauge what the market is thinking or 'feeling.'
2. Define open interest. Open interest is a lot like volume, but it only refers to the number of contracts entered into (read: open contracts). 'Trader position' is often used synonymously with open interest.
3. Review the relationship between open interest and trends in pricing. Open interest increases when new money enters the market; that is, when traders are betting more aggressively on the direction of the market. An increase in the measure generally supports the current trend and a decrease supports a change in sentiment.
4. Look up the open interest level for a currency. This varies according to the trading platform you use---all reputable trading platforms will have this option. Generally, you can choose to view the open interest for a currency on the price chart the same as you would view volume on a stock chart. Request assistance from the help desk of your trading platform if you can't find it.