4.4 Charting Volume and Open Interest

Volume and open interest are the two activity series most often drawn with a price chart. CMT Level I splits them across units. This section is construction and display: define the two series, name typical ways to plot volume on a price chart, and describe how open interest is shown on a futures chart. A later unit covers volume analysis — liquidity, participation, and the usual trend-implication rules for volume and open interest with price. Do not import those implication rules here. If you cannot yet draw the series, you are not ready to interpret it.

This OpenExamPrep section is independent study material for the Level I display unit.

Define volume

Volume is the number of units transacted during the interval represented by the price glyph:

• Equities and ETFs: shares traded.
• Futures: contracts traded.
• Options: contracts traded (often shown separately from the underlying).
• FX and some crypto venues: the platform may show tick volume (number of price updates) or notional volume when true share-count volume is not published. Know that the label on the histogram is only as good as the venue's definition.

Volume is a flow. It resets (or rather, it is counted fresh) for each interval: Monday's volume is Monday's turnover, not a running total of all shares that still exist. It answers "how much changed hands while this bar was forming?" It does not answer "at what price?" — that is the OHLC pane — and it does not answer "how many contracts are still open?" — that is open interest.

Total volume for a session is the sum of the interval volumes if you are looking at intraday bars that tile the session. A daily volume histogram bar is that session's total. A weekly volume bar, on a weekly price chart, is usually the week's summed volume, not an average, unless the platform states otherwise. Read the scale.

Volume is not:

• Price. A high-volume day can close unchanged.
• Open interest. You can trade a large volume while OI barely changes if activity is mostly position transfer (one party opening while the other closes).
• Liquidity as a single number. Volume is an input to a liquidity judgment; this unit only defines and displays it.

Define open interest

Open interest (OI) is the number of outstanding derivative contracts that have been opened and not yet closed. "Closed" means offset (an equal opposite trade in the same contract), exercised, assigned, or expired. Each long has a matching short, so OI counts pairs of open positions as one contract outstanding, not long plus short as two.

OI exists for futures and options (and similar listed derivatives). A common stock does not have open interest in this sense: shares outstanding are a corporate statistic, not a pit- or screen-traded open position count. Cash equities still have volume.

OI is a stock (a level), not a session flow. It is typically reported as of a session (often with a one-day lag on some futures). It carries over from day to day until positions close.

Mechanical identity (needed to understand the series, not to score trend):

That table defines how the OI number is produced. It is not a list of bullish or bearish implications. Those implication rules are the later volume, open interest, and price unit.

Because OI is contract-specific, a continuous futures price chart that rolls from one expiry to the next can show a step in the OI line at the roll if the platform splices front-month OI. That is a display/data issue: you may be looking at different contracts' outstanding positions, not a mysterious one-day collapse in participation.

Typical methods for displaying volume on a price chart

Volume is rarely plotted as the y-axis of the price pane on a conventional chart (price already occupies Y). Typical displays:

1. Histogram in a lower pane (the default). Under the bars or candles, each interval gets a vertical bar from a zero baseline whose height is that interval's volume. The histogram shares the x-axis with price: Monday's volume bar sits under Monday's candle. This is the picture Level I stems usually mean by "volume on a price chart."

2. Color-coded histogram. Many platforms color the volume bar to match a price rule: for example green/white if close ≥ prior close (or close ≥ open), red/black otherwise. Coloring is a display convention. It does not add a new data field; it restates a price comparison in the volume pane. Different vendors use close versus prior close versus close versus open — read the legend.

3. Overlay of a volume moving average. A line (often a 20- or 50-period average of volume) sits on top of the histogram so unusually tall bars are easier to see. The average is still a display aid, not a second market.

4. Volume as a line in the lower pane instead of a histogram. Less common; same data, different glyph.

5. Volume encoded in the price pane (width). EquiVolume and candle volume make width ∝ volume so activity is visible without a lower histogram (or in addition to one). That method was introduced with the x-axis unit: it is a display that changes horizontal spacing.

6. Volume at price (horizontal profile). A horizontal histogram along the right (or left) of the price pane shows how much volume traded at each price level, not at each time. The x-direction of that profile is volume; the y-direction is price. This is still a display method. Profile interpretation (value area, points of control as trading rules) is outside this construction unit.

On a line chart of closes, volume can still occupy the lower histogram; the missing OHLC in the price pane does not remove volume as a series. On point-and-figure, classic construction omits volume; some modern P&F tools annotate volume inside boxes, which is an add-on display, not the classic P&F x-axis.

How open interest is displayed on a futures chart

A futures price chart that includes OI typically adds a lower pane (or a second series in the volume region) whose y-scale is contracts outstanding.

The usual glyph is a line, not a thick histogram. OI is a running level. It does not burst from zero each morning the way a volume bar does. A line (sometimes a thin area fill) communicates "yesterday's outstanding contracts connected to today's" without looking like a second volume histogram. Some platforms will let you plot OI as bars; the classical textbook display is still a line beneath the futures price, frequently below or beside the volume histogram, with its own scale (volume and OI are not in the same units in any useful visual sense — one is today's turnover, the other is the stock of open contracts).

Layout you should be able to sketch:

1. Top pane: futures price (bars or candles).
2. Middle or lower pane: volume histogram (interval flow).
3. Lower pane: open interest line (outstanding contracts).

Software may combine (2) and (3) in one panel with dual axes. Dual axes are a display convenience. They do not make volume and OI the same variable.

Options charts may show call OI, put OI, or total OI as lines; that is the same level-versus-flow idea. This unit's Program Guide language is the futures chart: price, volume histogram, OI line.

Data lag and roll. Because official OI is often published after the close (and sometimes a day late), the line you see on a live session may be yesterday's OI under today's price bar. On a rolled continuous chart, inspect whether OI jumps at roll dates. Those are construction/display facts, not trend calls.

In practice

You open a daily chart of a crude oil future. Price candles occupy the main pane. Under them, a histogram shows that Tuesday printed about twice Monday's contracts traded — that is volume, the flow for each day. A smoother line in the pane below (or on a second scale) sits near 500,000 contracts outstanding and edges up or down by a few thousand a day — that is open interest, the level of still-open positions. You can describe how those series are drawn without yet claiming what a rise in OI "means" for the trend. That claim is the later unit.

What this section refuses to steal from volume analysis

You will later study how volume relates to liquidity and participation, how technicians read price with volume, VWAP (including anchored VWAP), and the textbook implications of volume and open interest rising or falling with price. None of that is required to define the series or to recognize the plot. If a practice stem asks whether rising OI confirms a trend, that is not this construction item. If it asks where OI is drawn on a futures chart, it is.

Exam traps

• Calling open interest "the same thing as volume." Volume is traded during the interval; OI is still open after the interval.
• Expecting OI on a common-stock chart. Stocks have volume; listed futures and options have OI.
• Reading a volume histogram as a price scale. Height is activity, not dollars.
• Treating a roll-day drop in continuous-contract OI as a market event before checking whether the platform changed expiry.

Chart construction now has glyphs (line, bar, candle), x-axis rules (time, volume, P&F, range bars), y-axis scaling (arithmetic versus log), and activity panes (volume histogram, futures OI line). Trend, patterns, and volume interpretation come next in the Classical Techniques sequence. Independent CMT Level I practice by OpenExamPrep is at /practice/cmt.