Relative Open Interest - Tradingriot

Relative Open Interest

This indicator presents a normalized visualization of Open Interest, employing methodology similar to oscillators like RSI.

It transforms raw Open Interest data into an intuitive format that helps identify significant shifts in market positioning within perpetual futures markets.


Overbought Territory (>70)
When the indicator enters overbought territory, it signals substantial new directional perpetuals futures increase in the market.

This surge in positioning can signal two potential scenarios:

Momentum Continuation: The influx of new participants reinforces the existing trend
Mean Reversion: The rapid accumulation of positions creates conditions for a potential reversal

Oversold Territory (<30)

Oversold readings indicate a significant reduction in open positions, typically through a combination of:

• Voluntary position closures
  
• Stop-loss triggers
  
• Forced liquidations
  

These conditions often present compelling mean reversion opportunities as the market digests this rapid position reduction.

Implementation Framework

While this indicator provides valuable insights into market positioning dynamics, it should be integrated within a comprehensive analytical framework rather than used in isolation.

The signals it generates are most effective when confirmed by complementary technical and fundamental analysis tools.

The indicator's strength lies in its ability to quantify and visualize significant changes in market participation, offering traders a sophisticated metric for understanding potential market inflection points and positioning dynamics.

Can be used on any timeframe with any lookback, make sure to backtest the settings that work best for you.

Do not forget that indicator only works when used on Binance perpetual futures charts.