Determination of the coefficient of open positions’
The open position is the percentage of open positions held for each of the major currency pairs on the trading floor, relative to the total number of positions held on all major currency pairs on this platform.
Breaking down the ‘open position ratio’
The coefficients of the open position is used by currency traders to give them a sense of what currency investors focused on showing how one of the major currency pairs in comparison with others – and are updated periodically throughout the day. They do not show the percentage of long or short positions relative to total positions in a major currency pair, for which there is a long-short relationship.
An example of the ratio of open positions
For example the currency pair Euro and USD (EUR/USD) may have a ratio of open position is 25.8. This means that the Euro/dollar is 25.8% of all open positions. The sum of the percentages is always 100%, even though minor currency pairs are not included in the calculations. The major pairs are the four Forex pairs which are considered most actively traded in the Forex market: the Euro/dollar, dollar/yen, pound/dollar and dollar/franc.
However, as the ratio of the open positions determined by the positions of traders that retail trading platform, it will be only a tiny example of what happens in the broader Forex market, where large investment banks dominating the market. Spot trades constitute only a small percentage of the foreign exchange market, and retail shopping sites is only a small fraction of. If the coefficients of an open position is any use, then, is to show how the retail trade has become crowded, and it may simply reflect herd behavior.