Reading charts & open interest
The chart tells you where price has been accepted and rejected. The option chain tells you where traders have bet money.
Candles and timeframes
Each candle shows the open, high, low and close for one period. In SWOT TRADER green candles closed higher than they opened and pink ones closed lower. Use a higher timeframe (15-minute or 1-hour) to see the trend, and a lower one (1 to 5 minutes) to time entries. A setup that agrees on both is stronger than one that only shows on the 1-minute chart.
Support and resistance
- Support is a level where buying has repeatedly stopped a fall: recent swing lows, the previous day's low, a pivot level.
- Resistance is a level where selling has repeatedly stopped a rise: swing highs, the previous day's high, round numbers like 24,000.
- When a level breaks, it often switches roles: old resistance becomes new support.
These levels are where you put stops and targets. A long trade's stop goes just below support; its first target is the next resistance.
Breakouts and fakeouts
A breakout is a close above a recent high; a breakdown is a close below a recent low. Many continue, but a meaningful share fail and reverse (a fakeout). Signs of a breakout more likely to hold:
- The candle closes beyond the level, not just a wick through it.
- Volume is higher than on recent candles.
- It agrees with the higher-timeframe trend.
- It does not come straight into another major level.
VWAP and the opening range
VWAP (volume-weighted average price) is the day's average traded price. Price holding above VWAP shows buyers in control; below it, sellers. On range-bound days, price often returns to VWAP.
The opening range is the high and low of the first 15 to 30 minutes. A clean break of it often sets the day's direction; a failed break often traps traders who chased it.
Open interest
Open interest (OI) is the number of contracts still open: positions that have been opened and not yet closed. Volume counts trades; OI counts outstanding bets. Combine the change in OI with the price move:
| Price | OI | Usual reading |
|---|---|---|
| Up | Up | New buying: long build-up |
| Up | Down | Sellers buying back: short covering, can be sharp but short-lived |
| Down | Up | New selling: short build-up |
| Down | Down | Buyers exiting: long unwinding |
This table is a rule of thumb, most reliable for futures. Treat it as context, never as a signal on its own.
PCR and OI walls
- Put-call ratio (PCR) is total put OI divided by total call OI. Above about 1.2, put writers dominate and traders expect support. Below about 0.8, call writers dominate and traders expect a ceiling. Extreme readings can also mean the crowd is too one-sided.
- OI walls are strikes with very large open interest. The biggest call-OI strike often acts as resistance (call writers defend it); the biggest put-OI strike often acts as support. When a wall breaks on expiry day, writers rush to cover and the move can accelerate.
Trading around news
Headlines move markets when they change expectations: a surprise RBI rate decision, a war or ceasefire, a crude oil spike, foreign fund flows. Know when news arrives (RBI policy at 10:00; US Fed decisions late at night India time, so India reacts at the next open). Big news lifts implied volatility and gamma together, so cut size or wait for the first reaction to settle.
A pre-trade checklist
- What is the higher-timeframe trend?
- Where are the nearest support and resistance, and the OI walls?
- Is price above or below VWAP and the opening range?
- Is there news due, or did a big headline just land?
- Where is my stop, where is my target, and is reward : risk at least 1.5 : 1?
- How many lots keep my loss at the stop near 1% of capital?
This is the same checklist the SWOT analysis in SWOT TRADER runs for you: Strengths and Weaknesses from the chart, Opportunities as a plan with levels, and Threats from time, volatility and news.