Trading Volume And Open Interest Are Important?

Trading volume of a security is a direct real time market sentiment indicator. A high trading volume is an indication that the current trend is likely to continue. Now, good volume analysis needs to be combined with other technical indicators in order to make a trading decision.
Now, volume figures are not available to currency traders in view of the over the counter unregulated nature of the currency market. However, volume figures are available to stocks and futures traders. The release of the volume figure in the futures market is delayed by one trading day.
Higher trading volume steadily moves towards the closest month to delivery in the futures market. Delivery month in the futures market is the month when the contract is settled and the physical delivery of the asset takes place. Higher trading volume is good for traders as it can mean a better price.
A Limit Up Day is a sign of strength however, a limit down day is usually followed by trading collars. You should know the Limit Days in futures market. Limit days are those days when a futures contract makes a big move in a very short period of time with heavy volume.
Volume data alone can be confusing. So as a trader, you need to use volume data in conjunction with technical indicators. This way, you can understand the signficance of trading volume change and the trend change. You should also understand how volume data is reported in the stock and the futures market. Open interest is the number of open contracts of a security in the market during a given trading period. Open interest is particularly an important tool for futures traders.
Open interest only applies to futures and options contracts and not to stocks. Open interest is the number of contracts entered into during a specific period of time but have not been liquidated or settled.
Charting open interest alongwith the price charts can be an important means of tracking a contract. Open interest is the total number of contracts of a particular security that is long or short. Open interest rises by one when a new buyer or a new seller enters the market and takes a position in a security.