Why analyze derivatives?
Perpetual contracts and futures provide leveraged exposure. When too many participants position in the same direction, the market becomes vulnerable to forced liquidation or reversal.
DerivScan10 measures positioning cost, changes in open contracts, the spot/derivatives spread, flow aggressiveness, position concentration and recent liquidations.
The ten DerivScan10 components
Average and persistent funding
Funding reflects the average cost of long/short financing. Persistence measures how long this pressure lasts and distinguishes a temporary imbalance from a prolonged extreme.
Premium mark/index
Premium measures the spread between the contract price and the underlying index. A positive spread shows buying pressure; a negative spread indicates excessive selling.
Open Interest and Price/OI quadrant
Changes in Open Interest show positions entering or leaving. Combining OI with price distinguishes a move supported by new contracts from one driven by closures or liquidations.
Three-month basis
Annualized basis measures the spread between the three-month futures price and spot. It describes market structure and medium-term hedging demand.
Taker Buy/Sell
This ratio compares the aggressiveness of executed buy and sell orders.
Global Long/Short ratio
It compares overall long and short exposure with the thirty-day average to identify extreme concentrations.
24-hour liquidations
Net liquidations measure positions forced to close and provide information about squeezes and capitulation.
Funding Pressure
Funding Pressure combines funding and Open Interest to assess the cost and accumulation of positioning.
Score and signal rules
Each component produces a −1, 0 or +1 marker confirmed by trend, momentum and volume context. Only confirmed candles are retained, and the result is normalized between −1 and +1.
A score at or below −0.60 indicates strong selling and a bullish extreme. From −0.60 to −0.20, bias is bearish. Between −0.20 and +0.20, the market is neutral or mixed. From +0.20 to +0.60, bias is bullish. At +0.60 or above, the scanner indicates strong buying associated with a bearish extreme.
Displayed rules are BUY from +0.40, SELL below −0.40 and WAIT between the two.
A largely contrarian reading
DerivScan10 primarily measures extremes. A SELL signal may appear when the market is overloaded to the upside; a BUY signal may reflect bearish capitulation.
The documentation states that SELL signals are generally more reliable for detecting tops. BUY signals require more confirmation because bottoms are more complex.
An extreme score does not provide the exact reversal time. It describes contrarian risk or opportunity that must be compared with structure.
Practical use and examples
The scanner is optimized for H1 swing trading. A coherent method is to qualify D1 or H4 and then use DerivScan10 as a positioning thermometer.
In a top-risk example, high funding, positive premium, rising OI, concentrated longs and dominant taker buys describe an overloaded market. A score below −0.40 calls for checking resistance, Sweep High, bearish CHOCH, upper wick and seller volume.
In a capitulation example, long liquidations and falling OI may accompany a score above +0.40. Sweep Low, bullish OB, bullish FVG or REJECTION are still needed to confirm the reaction.
CryptoScan10 measures technical indicators, whereas DerivScan10 covers derivatives. Divergence may indicate an active trend weakened by leverage.
Common mistakes to avoid
Reading DerivScan10 as a conventional directional indicator despite its contrarian logic.
Interpreting Open Interest without combining it with price.
Using an extreme score as a precise trigger.
Forcing a conclusion when data is missing or unconfirmed.
Reversing a D1 or W1 scenario based only on the derivatives scanner.
DerivScan10 reveals leverage cost, position concentration, contract changes and liquidations. Its best use is to detect an extreme and then wait for confirmation from structure and Price Action. Combining it with MTF-SYNC, SMC-FIBO and 4D Market Trigger completes the risk reading.