Bitmex Net Longs & Shorts

Some exchanges provide long and short data in some capacity (like Binance). Bitmex, unfortunately, does not. So we went ahead and tried to approximate this data using a combination of Open Interest, Buy/Sell Volume and a couple other metrics.

The general idea derives from the following combinations:

Price Change	Open Interest (OI) Change	Result
Price goes up	OI goes up	longs entering
Price goes down	OI goes up	shorts entering
Price goes up	OI goes down	shorts closing
Price goes down	OI goes down	longs closing

However, there are two flaws to the above approach.

1. The assumption is that price going up means that there is more buying than selling, hence more net buying with an increase in OI = longs entering. Similarly, price going down would mean more selling than buying. However, this is not always the case, as price can go up with more selling than buying (due to an imbalance in orderbook). Hence, one must look at buy volume and sell volume in combination with OI, rather than price.

2. When we say “longs entering”, this can be confusing. If OI goes up by 1million, this means 1 million longs entered and 1 million shorts entered. The number of longs and shorts in total are always the same. What “longs entering” really means is longs entering via market (aggressive) orders.

Buy Volume and Sell Volume is based on market orders.Since buy volume and sell volume is used as a key ingredient in net longs & net shorts data, we are actually estimating what the aggressive orders are doing. Some assume that this market data is more representative of retail data as retail is more likely to pay a larger fee for their orders.

Why do we use OI as another metric in estimating net longs and shorts?

A key concept to understand is that buy volume increasing does not automatically mean longs entering (or short volume increasing does not mean shorts entering). If we know that a market buy led to an increase in open interest, then yes, that market buy is likely associated with longs opening. However, if that market buy is coupled with open interest decreasing, then likely that market buy is longs closing.

Below is a table explaining all the combinations and why open interest is important to this estimation.

Market Order Type	Open Interest Change	Result
Market Buy	OI Increase	Longs entering
Market Sell	OI Increase	Shorts entering
Market Buy	OI Decrease	Shorts exiting
Market Sell	OI Decrease	Longs exiting