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An Introduction to Open Interest

The sentiment of the market is the most significant factor that can drive movement in the currencies market. Many traders usually overlook the assessment of the market sentiment. There are some ways how to determine the thoughts and feelings of most of the participants in the market and this article will discuss how to analyze them utilizing the interest analysis.

The Open Interest The analysis called open interest is not new to futures traders however it is entirely different to traders and those who spots forex movements. When spotting the foreign exchange market it is an important matter to remember is that the information regarding volume and open interest in not readily available since most transactions are done not through the currency exchanges.

This results in having no records for the entire transactions which takes place or those that happens in what is referred to as the back alleys. The important thing to note is that the volume and the open interest are important indicators and without them there is no reliability of spotting the movements of prices. The second option is to study the data available on the futures currencies.

Difference between FX Futures and Spot Forex The data of the volume and open interest regarding the currency futures will permit the trader to measure the market sentiment. This is continuously influenced by the spot foreign exchange markets. The futures of currencies are actually prices of the spots which have been adjusted from the swaps in order to come up with a delivery rate or price in the future time.

The difference is that the spot foreign exchange is not an exchange described as centralized the currencies of the futures market are already cleared at each exchange. Just like the Chicago Mercantile Exchange, considered to be the biggest market for currency futures that are exchanged and traded. These futures are based on the size of a standard contract with the usual three months period. While the spot foreign exchange has a transaction lasting up to two days only.

Another difference of the currency futures and the spot forex is based on the quotations. In the market of currency futures, they are usually quoted as a currency of foreign basis. They are quoted against the US currency directly. The prices of the currency futures which isn’t a pair and the spot usually moves in a combo. Where as the prices of the futures rise the spot also rises and when the spot goes down the futures also tend to go down.