DEFINITION of 'Open Position Ratio'
The percentage of open positions held for major currency pairs relative to all positions for major currency pairs. The open position ratio is used in forex trading, and includes both long and short positions. Trading platforms typically provide this information and update the ratio periodically over the course of the day.
BREAKING DOWN 'Open Position Ratio'
Open position ratios are provided by trading platforms, and are calculated from the positions of clients who use the platform. This means the ratio is only a sample of what may be occurring in the broader market. Large investment banks do not use retail trading platforms, so forex positions they hold are not included. Investors relying on small movements in major currency pairs to make a profit should take caution when using open position ratios, since large investment houses are more likely to move the market with their trades.
The open position ratio does not show the percentage of long or short positions relative to total positions for a major currency pair, but instead shows how a currency pair compares to all major currency pairs. For example, a currency pair of Euros and U.S. Dollars (EUR/USD) may have an open position ratio of 25.8. This means that of all open currency positions, EUR/USD represents 25.8 percent of all open positions. This shows the market that most investors are focusing on.