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Question: 1 / 400

What does rising open interest imply in a downtrend?

A Bullish sign

B Neutral market condition

C Bearish sign

Rising open interest in the context of a downtrend indicates that new positions are being added to the market, particularly in a bearish manner. This scenario suggests that existing participants are increasing their short positions, which reinforces the current trend downwards. As open interest rises, it signifies that more traders are becoming involved in the market under the assumption that prices will continue their decline, showing a consensus among participants about the bearish outlook.

In this way, rising open interest supports the continuation of the downtrend, rather than signaling a reversal or indicating a bullish sentiment. The logic here is rooted in the understanding of market dynamics; when traders are confident enough to increase their exposure to a downward movement, it usually reflects a stronger belief in the persistence of that downtrend. This is why rising open interest during a downtrend is seen as a bearish sign.

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D Reversal expected

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