In futures trading, many people have a very shallow understanding of futures positions. They lack in-depth research on basic knowledge, which leads to often being confused by various high-level theories such as volume, price, time and space. This article will give you a detailed analysis of the positional amount problem in futures trading, which is divided into three parts. The first part is the most basic, let’s talk about the relationship between position volume and price.
First of all, the position quantity indicator is displayed in the futures trading interface as follows:
This is the default interface after we log in to the software. The CJL inside is a mixed display chart of trading volume and position volume. The black line in the figure is the position volume, and the column inside is trading volume. Of course, you can also choose the OPI indicator to directly look at the position volume and ignore the trading volume.
Before we start explaining the position volume, we must first understand one truth: the futures market is just a platform. It designs a variety of futures contracts and then provides them to all traders to trade, and the futures exchange itself does not participate in the trading. For example, the rebar futures contract was designed and listed on the Shanghai Futures Exchange. All our futures traders who trade rebar futures must open futures accounts and then trade on the Shanghai Futures Exchange through futures companies.
What are we trading? It is a standardized futures contract designed by the futures exchange. Rebar futures are rebar futures contracts. And a futures contract is composed of buyers and sellers. To complete a contract, there must be buyers and sellers. So, we can see that all commodity futures contracts on the futures market have positions . Of course, since the holdings of financial futures are unilateral, the software may be odd, but its overall holdings must be even.
That is to say, any futures product has 100% long and short positions. Based on this, many people don’t understand that since the holding volume is the same, and one hand is long and the other hand is short, how does the price change?
The reason behind this is very simple. For example, a certain futures product has just begun to be listed for trading, with a benchmark price of 100. At this time, there were 2 lots of paying orders in the entire market, and their bids were 100. At the same time, there are now 10 sell orders on the market, and they all bid 100. So at this time, the market transaction price is 100. All 2 buy orders are sold, but what about 10 sell orders? 2 lots were sold. Which two hands are they?
Because the trading principle of price priority and time priority is implemented in the futures market. So, because the prices of these 10 lots are the same, so there is no price priority, so only time is preferred. Therefore, the two lots sold are the first two lots to place an order. The remaining 8 lots are waiting for the transaction in the market, and they are queuing up.
At this time, some people who also want to short find that there are already 8 lots in the market waiting to short at a price of 100, and there is no purchase. What does this mean? This shows that people are not interested in buying this price. But this group of short sellers felt that the price would "definitely" fall, so one of these people directly bid 95 to sell.
He gave a better price because this is better than 100 for his opponents (buyed). So, when someone who wanted to buy but did not take action, he saw that the price was 95 yuan, which was acceptable. So he placed an order to buy it. What happened at this time? The transaction price of
fell from 100 to 95. The transaction price is the latest price, so the current price is falling, down 5 points. What about the holdings in the market? I just started trading 4 lots, but what about now? Now 2 lots have been traded, and a total of 6 lots have been traded. There have been great changes, but it is still an even number, because if it is to be traded, it must be both parties, and there will never be an odd position.
But what about the price? Changes have been completed. In this process, we can see why the price of orders will undergo various trends when they are always equal.How did the price change in
occur? Although the number of orders within the market is as many. But don’t forget that the futures market is just a platform, and its holdings can expand infinitely, with many competitors and how many transactions can be made. At the current price, there is always a larger demand for one party. If this party wants to own the order as soon as possible, and if it wants to own the order, it needs to place orders that are more conducive to the opponent in order to complete the transaction earlier, which will lead to price changes.
For example, the total holdings in the entire market are 1 million, and there are N people outside the market staring, of which 100,000 want to buy, while only 100,000 want to sell. Then, all these 100,000 lots will definitely not be traded. At least 90,000 lots cannot be traded because they have no opponents. There is only one way to trade: rank among the top 100,000 lots of these 100,000 lots. So how to rank in the top 10,000?
is very simple, price first and time first. Buying at a higher price is the best choice. So, in this case, the price will rise.
Therefore, you can actually understand the relationship between position volume and price: although the number of orders in the market is the same. However, there are still many people who want to own orders outside the market, and there is always a limited number of orders on one side, which will lead to changes in prices.
Part 2:
Regarding the futures position volume issue, there is another problem that makes many traders dizzy, that is, what does the increase and decrease of futures position volume mean?
First of all, we must understand that the increase and decrease of position volume must be even. If the holding volume increases, it will inevitably mean that there is an additional contract in the market, and one contract requires both parties to complete the transaction. If the holding volume is small, it must be that there is a contract missing in the market. The reduction of one contract requires both buyers and sellers to exit the transaction at the same time.
For example, there are 100 handheld positions in the futures market, and the latest price is 100. At this moment, two traders came, one of whom bought a position and one opened a position, while the other sold a position and one opened a position. Both of their bids were 100. It was obvious that after they made a deal, there was an additional contract in the market, and the position volume increased by 2 lots. Because both of them had positions (both opened positions), the position volume rose to 102.
Another situation is that there are 100 handheld positions in the futures market, and the latest price is 100. It is obvious that these 100 moves are more than 50 moves and 50 moves are empty. At this moment, two traders in the 100 positions, one of them held a short position of 50 short positions, while the other one held a long position of 50 long positions, and they wanted to close the contract in their hands at the same time. Then a trader holding a short order needs to buy a closing order, while another trader holding a long order needs to sell a closing order. Their bids were also 100. After they made a deal, a contract was missing in the market. Because both the buyer and the seller stopped playing, they suspended their continued holdings, so the holding volume became 98.
He holds long positions, but he wants to stop the transaction, so he needs to sell and close the position. If he wants to complete the transaction, he needs an opponent to buy it. But at this moment, there is only one trader who wants to buy, but he is off-market and wants to enter, that is, he needs to buy and open a position.
They can also trade, but they can close positions and buy open positions. What does this mean? It is equivalent to one person's orders for the 100 hands in the field were given to another person. This situation is called a turnover in futures trading. After the turnover, there are still 100 orders in the market, and the quantity has not changed, but the person holding has changed. In this case, the long order turnover is called long order, and the short order turnover is called short order. The four situations of
are rapidly and in large quantities during futures trading, so the position volume always changes back and forth. However, is it directly related to the increase and decrease in position volume that leads to price changes? In fact, there is no increase or decrease in holdings, which can only indicate whether the number of contracts in the current market has increased or decreased.What causes the price change of
? It is determined by these long and short positions that lead to changes in position volume.
For example, 100 handheld position. 50 long positions, 50 short positions. If there are 20 long positions off the market and want to buy and open positions, 0 short positions want to sell and open positions, while 5 long positions on the market and 5 long positions on the market and want to sell, and 0 short positions want to buy and close positions. what happens?
can be seen that there are 20 lots who want to buy, and only 5 lots who want to sell. Then the buying power is very strong. Obviously, if they all traded, a total of 10 lots would be sold. All 10 moves were switched, and there were more than 5 moves on the field, which was exchanged for the top five of the 20 moves off the field. The holding volume remains unchanged at all, but what about the price? It is very likely to rise sharply. Because the buying power is three times stronger.
So, similarly, the situation just now changes: 100 handheld position. 50 long positions, 50 short positions. If there are 0 long positions off the market and want to buy and open positions, 20 short positions want to sell and open positions, while there are 0 long positions on the market and 5 short positions on the market and want to buy and close positions. what happens?
has the same situation as 20 lots want to sell, but only 5 lots want to buy. It is obvious that if all transactions are made, the position volume will remain unchanged, but what about the price? It is very likely to fall sharply... because the selling power is three times stronger.
In other words, the change in position volume itself does not mean anything. If the price changes, it depends on the comprehensive comparison of the strength of the buyer and seller.
If you can understand all the above process, then we can understand many graphs, such as the following figure:
In this figure, the line in the indicator bar below is the change in position volume. You can see that the position volume is constantly increasing. If we don’t look at the price, we can only know that in this process, the number of long and short opening positions combined is greater than the number of closed positions in this process. But what about the price?
price keeps rising, we know that the overall strength is to buy stronger. In other words, this process is caused by a large number of long orders being bought and opened. A large number of long orders are bought and opened. Among the orders traded with them, some are sold to open positions, and some are sold to close positions. These long orders will increase the position volume of these positions and sell-opening transactions, and will remain unchanged with the position volume of these positions. Overall, it will basically lead to an increase in holdings.
Then someone asked, why can’t it be caused by buying and closing positions? Isn’t it said that as long as the buying power is strong, the price will rise? It's very simple. If the buying and closing position is stronger, although the price will rise, the holding volume will definitely decline. Because it is trading with the opponent's trading. If it is a buy closing position VS and sell opening position, then it is a turnover, and the position volume remains unchanged. If it is a buy closing position VS and sell closing position, then it is a double set, with the position volume decreasing by 2 lots. Overall, the position volume will not rise against the trend, and will remain flat at most, and basically it will definitely decline. The trend of
should be the following figure:
Holdings decreased, while the price rose.
Part 3:
What we want to discuss is: Can we judge the future price trend through changes in position volume?
The answer is obvious: No.
Why? Because we don't know that we focus on the expectations of traders of this variety, that is, the ideas of off-market funds and on-market funds.
Although, after we have learned the first two articles of holdings, we can understand how all trends fundamentally change. We know that increasing positions upward means that long positions are opening and opening positions, and increasing positions downward means that long positions are closing positions and then exerting force. The position volume remains unchanged because at this stage both parties open positions, close positions, and turnover reaches a balance.
For example, there are 2 long positions and 2 short positions opening positions against the transaction, while 2 long positions and 2 short positions closing positions at the same time, and 2 long positions changing hands, and 10 short positions changing hands. It is obvious that the holding volume at this stage will basically not change, but the price may still go out of the direction.
So, since we can understand the relationship between the current position and the changes in price, can we make some "certainty" judgments about future prices?
cannot. Because although we can understand the situation at this stage of the trend, one thing we must know is that these are all market trends that have been passed, and these are all situations that have already happened.
After the game of power between the two sides was completed, the process was left for us to show, and this process was determined. However, what determines the future trend?
is determined by the subsequent behavior of multiple parties. If the large number of long positions in the position are to be closed next, it is obvious that the price will fall because they need to sell to close the position and the position will also fall. And if a large amount of funds suddenly come off the market and want to buy and open a position, then it is obvious that the price will rise, and what about the position? Will increase significantly. However, can we know what actions will they take next for the funds on the market and those who are watching the funds on the market? Moreover, these funds are not necessarily a few large capital traders, and these funds may also be a large group of people in a certain direction. We don’t know exactly what these big funds and these people think.
Therefore, it is unrealistic for us to judge the future through the holding volume and the current price trajectory.
As an example.
For example, there are 1,000 handheld positions in the current market, and the price is 100. At this moment, the holding volume suddenly increased to 1200 and the price soared to 120. It is obvious that this shows that new long funds are buying and opening positions in large quantities. With their arrival, they have eaten up all short orders below the price of 120, and they have traded 100 lots.
Then, the price rises and the position increases. What will happen next? What will happen later? Some people say that this means prices will continue to rise...because big funds have entered the market.
can actually? In fact, this new long capital may be just that little money, and he suddenly filled up his position. On the contrary, because he directly pulled the price to 120 in an instant. Another big spot trader saw it. In an instant, he opened a short position with 100 lots and directly pushed the price back to 100. What about the position volume? Another 200 lots were added. The price has not risen at all.
Of course, there are many possibilities, for example, because this new long raises the price to 120, a long capital in the previous 1,000 handheld position looked at it: Oh, the price is in place, I ran away. Then he sold all the 100 orders in his hand... As a result, the price still fell back to 100...
Similarly, it is also possible that 50 old long orders in the 1,000 handhold positions will be used at the same time as 50 new short orders in a certain short order in the scene to suppress the price.
and other situations will lead to a price decline, so increasing positions does not mean any certainty.
Of course, there must be other possibilities, such as the entry of this new long capital has stimulated the enthusiasm of the bulls, and a large amount of funds have poured in, directly pulling the price to the sky, etc.
However, we still cannot predict these situations. We have no way to know what all traders who trade this futures product think, so we have no way to conduct predictive trading through changes in position volume and price.
Of course, although it is unpredictable, we can make some trial and error trading models through the relationship between position volume and price. We will discuss these later.
