Futures Open Interest Analysis

Entry Logic

• Exact Entry Trigger: Enter long when open interest is rising along with price. Enter short when open interest is rising but price is falling.
• Confirmation: The change in open interest should be significant.
• Timeframe: Daily chart.
• Location Context: Not applicable.
• Market Condition: A market where open interest is providing a clear signal.

Exit Logic

• Profit Targets: A fixed target based on the expected continuation of the trend.
• Scaling Out: Not recommended.
• Trailing Stop: Trail the stop loss below a recent swing low for longs, or above a recent swing high for shorts.
• Signal Failure Exit: Exit if open interest starts to decline.
• Opposite Signal Exit: Not applicable.
• Time Expiration: Exit the trade when the trend shows signs of reversing.
• Momentum Loss: Not applicable.

Stop Loss Structure

• Hard Stop: A fixed stop based on a percentage of the contract value.
• Soft Stop: Not used.
• Max Dollar Loss: Varies by contract.
• Max Percent Loss: 2% of account capital.
• Structural Stop: Not applicable.

Risk Management Framework

• Risk Per Trade: 1% of account capital.
• Maximum Daily Loss Limit: Not applicable.
• Maximum Weekly Loss Limit: Not applicable.
• Maximum Drawdown: 15% from peak equity.
• R:R Requirement: Minimum 2:1 risk-reward ratio.

Position Sizing Model

• Sizing Approach: Fixed contract size.
• Volatility Adjustment: Not applicable.
• Conviction Sizing: Not applicable.
• Scaling In: Not recommended.
• Scaling Out: Not recommended.

Trade Filtering

• Market Conditions to Avoid: A market where open interest is not providing a clear signal.
• Specific Setups Required: A clear trend in both price and open interest.
• Instruments: Any futures contract.
• Time Restrictions: Can be traded at any time.
• Chop/News Avoidance: Not applicable.

Context Framework

• Trend Direction: Trade in the direction of the trend confirmed by open interest.
• VWAP Relationship: Not applicable.
• MA Relationship: Not applicable.
• Range Location: Not applicable.
• Higher TF Alignment: Not applicable.

Trade Management Rules

• Breakeven: Not applicable.
• Scale Out: Not applicable.
• Add Size: Not recommended.
• Fast vs Slow Moves: This is a slow-moving strategy. Be patient.

Time Rules

• Optimal Trading Window: When there is a clear trend in price and open interest.
• Times to Avoid: When open interest is flat or declining.
• Session Notes: This strategy can be traded in any session.

Setup Classification

• A+ Setup: A strong trend in price with a sharp increase in open interest.
• A Setup: A decent trend with a moderate increase in open interest.
• B Setup: A weak trend or a small increase in open interest.
• C Setup: Avoid. No clear signal from open interest.

Market Selection Criteria

• Instruments: Any futures contract.
• Volume/Liquidity: High volume and liquidity are essential.
• Volatility: Moderate volatility is preferred.

Statistical Edge Metrics

• Win Rate: 60-65%.
• Avg Win: 2.5R.
• Avg Loss: 1R.
• Profit Factor: 1.62.
• Expectancy: 0.62R per trade.

Failure Conditions

• When Strategy Fails: When the relationship between price and open interest breaks down.
• Specific Scenarios to Avoid: Trading this strategy when open interest is giving a conflicting signal.

Psychological Rules

• Mental Discipline: Have a good understanding of how to interpret open interest data.

Advanced Components

• Regime Detection: Not applicable.
• Filters: Monitor open interest data for significant changes.
• Correlation: This strategy is based on the correlation between price and open interest.
• MTF Alignment: Not applicable.

Location

• Where Strongest: In a trending market where open interest is confirming the trend.
• Where Weakest: In a range-bound market.