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Commitment of traders chart forex

Commitment of traders chart forexTrack The Largest Traders With The Commitment of Traders (CoT) Report. by Tyler Yell, CMT , Forex Trading Instructor. Position Trading based on technical set ups, Risk Management & Trader Psychology. Your Forecast Is Headed to Your Inbox. But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk. Your demo is preloaded with ?10,000 virtual funds , which you can use to trade over 10,000 live global markets. We'll email you login details shortly. You are subscribed to Tyler Yell. You can manage you subscriptions by following the link in the footer of each email you will receive.

An error occurred submitting your form. Please try again later. What Is The Commitment of Traders Report? Who Are the Players In The Report? How to Read CoT for Directional Bias. What Is the Commitment of Traders Report? How would you like to know what the smartest guys and girls in the room are doing? Thanks to a requirement by the Commodity Futures Trading Commission, the largest futures traders in the world are required to report their positions which can easily be tracked due to the margin they must pay to hold their large positions which the CFTC has been publishing since 1962 and since 2000, every Friday at 3:30ET pm. This information can be of extreme help due to the people who come into the Futures market like hedge funds to make a return above their respective index or some of the largest companies in the world with real-time data of the health of the economy that come to the futures market to hedge their exposure to price fluctuations of raw materials that they use to make their product or preform their service. Learn Forex: CoT Report for Euro FX (EURUSD) as of 01282014.

It may be helpful to think of the CoT report as a sentiment indicator with a lot more depth than most indicators. The depth, of course, comes from the fact that the readings are based on the largest future traders and can help you see when large fortune-500 companies switch their outlook on something that you’re trading. In short, this report provides incredible levels of insider intelligence that you’d be hard-pressed to find in another avenue. Who Are the Players In The Report? Commercials – Using the futures market primarily for hedging unfavorable price swings to their daily operations. They likely have the best insight as to what the demand and future is for the market as a hole and have some of the deepest pockets. These players are also known as commercial hedgers. Examples: Coca Cola in the Sugar Market or American Airlines in the Gasoline Market. Non-Commercials (Speculators Funds) – Traders, whether hedge-funds are large individuals, who have no interest in taking delivery but are rather in the market for profit and meet reportable requirements of the CFTC.

Examples: Hedge Funds and large banks or large Commodity Trading Advisors (CTAs) Nonreportable Positions – Long & Short open interest on positions that don’t meet reportable requirements, i. e. small traders. Examples: This is the leveraged players without deep pockets and are shaken out on big moves, similar to the DailyFX SSI. How to Read the CoT for Directional Bias? Upon the first reading of the CoT, you may be confused how future positions in USD, JPY, GBP or EUR could be helpful for trading EURUD, USDJPY, or EURGBP. There is a lot to learn about the Commitment of Traders report but what’s often helpful is to find when there is a very strong divergence between large speculators and large commercials. Learn Forex: Look to See What Hedge Funds Are Buying Selling. Learn Forex: Non-Commercials Hedge Funds Sold USDJPY Longs & Charts Confirm This. Chart Created by Tyler Yell, CMT. The first place to start with is a clean understanding of Net Positioning w hich is shown clearly on the repo rts and the week over week differential of major market bias (circled above) . It may be helpful to know that what you’re looking for isn’t as much the specific number but a clear sign in % of open interest or bias so that you see Non-Commercials Funds flipping against the primary trend. Furthermore, when you see a key flip in sentiment of non-commercials funds who are in it for the money and not to be hedged like commercials, and there is a confirmation on the charts that a trend is exhausting, you are likely trading in the direction of the big kids. As you can see from the last report in January, the number of funds off-loading the JPY shorts increased dramatically from the week prior. When you see this type of shift from major funds, you can look for other signs that show the prior trend is losing steam and that maybe you should exit the trade too. The chart above of USDJPY notes that there have been 4 bearish key days on USDJPY since the start of 2014 at the same time non-commercials have unloaded their USDJPY longs JPY shorts giving credence that this move down may have more to go. Another excellent tool, is the Commitment of Traders Analysis from DailyFX . This weekly report provides analysis of the CFTC report, showing the positioning of Forex futures trades with a synopsis of the key flips in positioning. This report also helps traders by providing 52-week percentiles of major moves so you can see if we’re currently at annual bullish bearish extremes so that you should be tightening stops or looking for price action to confirm the funds are selling out so that you can follow.

Bottom Line: Look for Chart Validation of what the Non-Commercial Are Doing. When you have a large percentage (greater than 10%) of non-commercials flipping their bias, it’s time for you to take note. Lastly, if you want to really juice up your understanding of market sentiment, you can get a better feel for how a sample group of non-reportables or smaller traders are positioned in OTC FX via the DailyFX Speculative Sentiment Index which is updated twice a day . ---Written by Tyler Yell, CMT. Trading Instructor Currency Analyst. To contact Tyler, email [email protected] com. Follow me on Twitter @ForexYell. To receive Tyler’s analysis and educational emails directly to your inbox, please sign up here. Interested In Our Analyst's Best Views On Major Markets? Check Out Our Free Trading Guides Here. DailyFX provides forex news and technical analysis on the trends that influence the global currency markets. COT Forex - CFTC's Commitments of Traders. Net non-commercial positions for major currency.

These graphs show the CFTC's Commitments of Traders (COT) weekly data: net positions for "non-commercial" (speculative) traders in the U. S. forex futures markets, along with open interest contracts held by all parties. This futures data influences and is influenced by the spot forex market, and is considered an indicator for analyzing market sentiment. About Commitments of Traders. The Commitments of Traders (COT) is a report issued by the Commodity Futures Trading Commission (CFTC). It aggregates the holdings of participants in the U. S. futures markets (primarily based in Chicago and New York), where commodities, metals, and currencies are bought and sold. The COT is released every Friday at 3:30 Eastern Time, and reflects the commitments of traders for the prior Tuesday. The COT provides a breakdown of aggregate positions held by three different types of traders: “commercial traders” (in forex, typically hedgers), “non-commercial traders” (typically, large speculators), and “nonreportable” (typically, small speculators). The Net Non-Commercial Positions shown in the chart above are from contracts held by large speculators, mainly hedge funds and banks trading currency futures for speculation purposes. Speculators are not able to deliver on contracts and have no need for the underlying commodity or instrument, but buy or sell with the intention of closing their “sell” or “buy” position at a profit, before the contract becomes due. These contracts, sold in lot sizes that vary by currency, net out to have either a surplus of buy requests (positive values in the chart) or sell requests (negative values). The Open Interest represents the total number of contracts, including both buy and sell positions, outstanding between all market participants. That is, the total of all futures andor option contracts entered into and not yet offset by a transaction, by delivery, by exercise, and so on. These figures are not netted, but instead show overall volume (that is, interest).

Note: In the futures market, the foreign currency is always quoted directly against the U. S. dollar. In the spot forex market, some currencies are quoted the opposite way. For consistency, these graphs provide futures market position data on a reverse axis (with negative values above the 0-axis) whenever the quote order is opposite the spot forex notation. This is the case for the Swiss Franc, for example, which in forex is quoted against the US dollar (USDCHF). This is for general information purposes only - Examples shown are for illustrative purposes and may not reflect current prices from OANDA. It is not investment advice or an inducement to trade. Past history is not an indication of future performance. © 1996 - 2018 OANDA Corporation. All rights reserved. "OANDA", "fxTrade" and OANDA's "fx" family of trademarks are owned by OANDA Corporation. All other trademarks appearing on this Website are the property of their respective owners.

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The Commitment of Traders (COT) reports provide a breakdown of each Tuesday’s open interest for markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC. Commitment of Traders (COT) charts are updated each Friday at 3pm CST. Forex commitment of traders reports are based on the corresponding futures contracts traded on the Chicago Mercantile Exchange. Financial Traders Reports. THE COMMITMENT OF TRADERS (COT) REPORT. Open interest is the total of all futures andor option contracts entered into and not yet offset by a transaction, by delivery, by exercise, etc. The aggregate of all long open interest is equal to the aggregate of all short open interest. Open interest held or controlled by a trader is referred to as that trader's position. For the COT Futures-and-Options-Combined report, option open interest and traders' option positions are computed on a futures-equivalent basis using delta factors supplied by the exchanges. Long-call and short-put open interest are converted to long futures-equivalent open interest. Likewise, short-call and long-put open interest are converted to short futures-equivalent open interest. For example, a trader holding a long put position of 500 contracts with a delta factor of 0.50 is considered to be holding a short futures-equivalent position of 250 contracts. A trader's long and short futures-equivalent positions are added to the trader's long and short futures positions to give "combined-long" and "combined-short" positions.

Open interest, as reported to the Commission and as used in the COT report, does not include open futures contracts against which notices of deliveries have been stopped by a trader or issued by the clearing organization of an exchange. Clearing members, futures commission merchants, and foreign brokers (collectively called reporting firms) file daily reports with the Commission. Those reports show the futures and option positions of traders that hold positions above specific reporting levels set by CFTC regulations. If, at the daily market close, a reporting firm has a trader with a position at or above the Commission's reporting level in any single futures month or option expiration, it reports that trader's entire position in all futures and options expiration months in that commodity, regardless of size. The aggregate of all traders' positions reported to the Commission usually represents 70 to 90 percent of the total open interest in any given market. From time to time, the Commission will raise or lower the reporting levels in specific markets to strike a balance between collecting sufficient information to oversee the markets and minimizing the reporting burden on the futures industry. Commercial and Non-Commercial Traders. When an individual reportable trader is identified to the Commission, the trader is classified either as "commercial" or "non-commercial." All of a trader's reported futures positions in a commodity are classified as commercial if the trader uses futures contracts in that particular commodity for hedging as defined in CFTC Regulation 1.3(z), 17 CFR 1.3(z). A trading entity generally gets classified as a "commercial" trader by filing a statement with the Commission, on CFTC Form 40: Statement of Reporting Trader, that it is commercially ". engaged in business activities hedged by the use of the futures or option markets." To ensure that traders are classified with accuracy and consistency, Commission staff may exercise judgment in re-classifying a trader if it has additional information about the trader's use of the markets. A trader may be classified as a commercial trader in some commodities and as a non-commercial trader in other commodities. A single trading entity cannot be classified as both a commercial and non-commercial trader in the same commodity.

Nonetheless, a multi-functional organization that has more than one trading entity may have each trading entity classified separately in a commodity. For example, a financial organization trading in financial futures may have a banking entity whose positions are classified as commercial and have a separate money-management entity whose positions are classified as non-commercial. The long and short open interest shown as "Nonreportable Positions" is derived by subtracting total long and short "Reportable Positions" from the total open interest. Accordingly, for "Nonreportable Positions," the number of traders involved and the commercialnon-commercial classification of each trader are unknown. THE COMMITMENT OF TRADERS FINANCIAL FUTURES (TFF) REPORT. The Traders in Financial Futures (TFF) builds on improvements to transparency in the CFTC’s weekly Commitments of Traders (COT) Reports. The new report separates large traders in the financial markets into the following four categories: The TFF report divides the financial futures market participants into the "sell side" and "buy side." This traditional functional division of financial market participants focuses on their respective roles in the broader marketplace, not whether they are buyers or sellers of futuresoption contracts. The category called "dealerintermediary," for instance, represents sell-side participants. Typically, these are dealers and intermediaries that earn commissions on selling financial products, capturing bidoffer spreads and otherwise accommodating clients. The remaining three categories ("asset managerinstitutional;" "leveraged funds;" and "other reportables") represent the buy-side participants. These are essentially clients of the sell-side participants who use the markets to invest, hedge, manage risk, speculate or change the term structure or duration of their assets. Contents of the Traders in Financial Futures (TFF) Report. These participants are what are typically described as the "sell side" of the market. Though they may not predominately sell futures, they do design and sell various financial assets to clients.

They tend to have matched books or offset their risk across markets and clients. Futures contracts are part of the pricing and balancing of risk associated with the products they sell and their activities. These include large banks (U. S. and non-U. S.) and dealers in securities, swaps and other derivatives. The rest of the market comprises the "buy-side," which is divided into three separate categories: These are institutional investors, including pension funds, endowments, insurance companies, mutual funds and those portfolioinvestment managers whose clients are predominantly institutional. These are typically hedge funds and various types of money managers, including registered commodity trading advisors (CTAs); registered commodity pool operators (CPOs) or unregistered funds identified by CFTC. The strategies may involve taking outright positions or arbitrage within and across markets. The traders may be engaged in managing and conducting proprietary futures trading and trading on behalf of speculative clients. Reportable traders that are not placed into one of the first three categories are placed into the "other reportables" category. The traders in this category mostly are using markets to hedge business risk, whether that risk is related to foreign exchange, equities or interest rates. This category includes corporate treasuries, central banks, smaller banks, mortgage originators, credit unions and any other reportable traders not assigned to the other three categories. Commitments of Traders (COT) Charts. The Commitment of Traders (COT) reports provide a breakdown of each Tuesday’s open interest for markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC. Commitment of Traders (COT) charts are updated each Friday at 3pm CST. The Commitment of Traders information is available with both the Disaggregated and Financial Traders Reports.

Disaggregated Report Charts. Financial Traders Reports. THE COMMITMENT OF TRADERS (COT) REPORT. Open interest is the total of all futures andor option contracts entered into and not yet offset by a transaction, by delivery, by exercise, etc. The aggregate of all long open interest is equal to the aggregate of all short open interest. Open interest held or controlled by a trader is referred to as that trader's position. For the COT Futures-and-Options-Combined report, option open interest and traders' option positions are computed on a futures-equivalent basis using delta factors supplied by the exchanges. Long-call and short-put open interest are converted to long futures-equivalent open interest. Likewise, short-call and long-put open interest are converted to short futures-equivalent open interest. For example, a trader holding a long put position of 500 contracts with a delta factor of 0.50 is considered to be holding a short futures-equivalent position of 250 contracts. A trader's long and short futures-equivalent positions are added to the trader's long and short futures positions to give "combined-long" and "combined-short" positions.

Open interest, as reported to the Commission and as used in the COT report, does not include open futures contracts against which notices of deliveries have been stopped by a trader or issued by the clearing organization of an exchange. Clearing members, futures commission merchants, and foreign brokers (collectively called reporting firms) file daily reports with the Commission. Those reports show the futures and option positions of traders that hold positions above specific reporting levels set by CFTC regulations. If, at the daily market close, a reporting firm has a trader with a position at or above the Commission's reporting level in any single futures month or option expiration, it reports that trader's entire position in all futures and options expiration months in that commodity, regardless of size. The aggregate of all traders' positions reported to the Commission usually represents 70 to 90 percent of the total open interest in any given market. From time to time, the Commission will raise or lower the reporting levels in specific markets to strike a balance between collecting sufficient information to oversee the markets and minimizing the reporting burden on the futures industry. Commercial and Non-Commercial Traders. When an individual reportable trader is identified to the Commission, the trader is classified either as "commercial" or "non-commercial." All of a trader's reported futures positions in a commodity are classified as commercial if the trader uses futures contracts in that particular commodity for hedging as defined in CFTC Regulation 1.3(z), 17 CFR 1.3(z). A trading entity generally gets classified as a "commercial" trader by filing a statement with the Commission, on CFTC Form 40: Statement of Reporting Trader, that it is commercially ". engaged in business activities hedged by the use of the futures or option markets." To ensure that traders are classified with accuracy and consistency, Commission staff may exercise judgment in re-classifying a trader if it has additional information about the trader's use of the markets. A trader may be classified as a commercial trader in some commodities and as a non-commercial trader in other commodities. A single trading entity cannot be classified as both a commercial and non-commercial trader in the same commodity.

Nonetheless, a multi-functional organization that has more than one trading entity may have each trading entity classified separately in a commodity. For example, a financial organization trading in financial futures may have a banking entity whose positions are classified as commercial and have a separate money-management entity whose positions are classified as non-commercial. The long and short open interest shown as "Nonreportable Positions" is derived by subtracting total long and short "Reportable Positions" from the total open interest. Accordingly, for "Nonreportable Positions," the number of traders involved and the commercialnon-commercial classification of each trader are unknown. THE DISAGGREGATED COMMITMENT OF TRADERS (DISAGGREGATED COT) REPORT. The Disaggregated COT report, covering only the major physical commodity markets, increases transparency from the legacy COT reports by separating traders into the following four categories of traders: The legacy COT report separates reportable traders only into "commercial" and "non-commercial" categories. A "producermerchantprocessoruser" is an entity that predominantly engages in the production, processing, packing or handling of a physical commodity and uses the futures markets to manage or hedge risks associated with those activities. A "swap dealer" is an entity that deals primarily in swaps for a commodity and uses the futures markets to manage or hedge the risk associated with those swaps transactions. The swap dealer's counter parties may be speculative traders, like hedge funds, or traditional commercial clients that are managing risk arising from their dealings in the physical commodity.

A "money manager," for the purpose of this report, is a registered commodity trading advisor (CTA); a registered commodity pool operator (CPO); or an unregistered fund identified by CFTC. These traders are engaged in managing and conducting organized futures trading on behalf of clients. Every other reportable trader that is not placed into one of the other three categories is placed into the "other reportables" category. THE COMMITMENT OF TRADERS FINANCIAL FUTURES (TFF) REPORT. The Traders in Financial Futures (TFF) builds on improvements to transparency in the CFTC’s weekly Commitments of Traders (COT) Reports. The new report separates large traders in the financial markets into the following four categories: The TFF report divides the financial futures market participants into the "sell side" and "buy side." This traditional functional division of financial market participants focuses on their respective roles in the broader marketplace, not whether they are buyers or sellers of futuresoption contracts. The category called "dealerintermediary," for instance, represents sellside participants. Typically, these are dealers and intermediaries that earn commissions on selling financial products, capturing bidoffer spreads and otherwise accommodating clients.

The remaining three categories ("asset managerinstitutional;" "leveraged funds;" and "other reportables") represent the buy-side participants. These are essentially clients of the sell-side participants who use the markets to invest, hedge, manage risk, speculate or change the term structure or duration of their assets. Contents of the Traders in Financial Futures (TFF) Report. These participants are what are typically described as the "sell side" of the market. Though they may not predominately sell futures, they do design and sell various financial assets to clients. They tend to have matched books or offset their risk across markets and clients. Futures contracts are part of the pricing and balancing of risk associated with the products they sell and their activities. These include large banks (U. S. and non-U. S.) and dealers in securities, swaps and other derivatives. The rest of the market comprises the "buy-side," which is divided into three separate categories: These are institutional investors, including pension funds, endowments, insurance companies, mutual funds and those portfolioinvestment managers whose clients are predominantly institutional. These are typically hedge funds and various types of money managers, including registered commodity trading advisors (CTAs); registered commodity pool operators (CPOs) or unregistered funds identified by CFTC. The strategies may involve taking outright positions or arbitrage within and across markets. The traders may be engaged in managing and conducting proprietary futures trading and trading on behalf of speculative clients.

Reportable traders that are not placed into one of the first three categories are placed into the "other reportables" category. The traders in this category mostly are using markets to hedge business risk, whether that risk is related to foreign exchange, equities or interest rates. This category includes corporate treasuries, central banks, smaller banks, mortgage originators, credit unions and any other reportable traders not assigned to the other three categories. Commitment of traders chart forex. gives you the Overall Picture of what is happening behind the scenes of each Futures market. It actually tells you who’s buying and who’s selling; that information is just way too important to leave to chance. Without knowing the COT, you’re basically trading blindfolded; this information is absolutely “key” to your trading success! You see, the Commitment of Trader’s Report is broken down into three categories, take a look at the following indicator: In this graphic, you will notice that we have three color bars and one yellow line: Red Bars: The Commercial Traders (i. e. Farmers, Hedgers, Producers, and Factories) Blue Bars: The Large Speculators (i. e. Banks and Large Financial Money Managers) Green Bars: The Small Speculators (i. e. You and me) Yellow Line: The overall open interest in the market. Notice that the Red bars are all pointing down, which indicates that the Commercials are all selling, or going short. Notice that the Blue bars are all facing up, which means the Large Speculators are buying, going long in the market.

Basically, the Red guys, the big Commercials are selling their contracts to the Blue guys, the Big Speculators. Look at the little Green guys, they are the Small Speculators, guys like you and me, who are also going short, or selling, that’s why their bars are all facing down too. Commitment of Traders Plugin works with Track n’ Trade Live Futures and Track n’ Trade End of Day Futures. Order Track 'n Trade Pro with the Commitment of Trader's Plug-in and get 20% off your order! The Commitment of Forex Traders - COT report. The Commitment of Traders report is a disclosure of the net long and short positions taken by both speculative and commercial traders. It's a terrific resource that lets you see how the market's big players are positioned in the market. Forex-Central already lets you see what individual traders are positioned on, but do you want to follow the herd, knowing that most of the herd is losing money?! Probably not! The COT (Commitment of Traders) report is actually a report on currency futures positions that are taken by institutional players: commercial traders (companies and banks that are hedging to protect themselves from adverse currency swings) and non-commercial traders (speculators who are only looking to make profits, such as fund managers, financial institutions and individual traders just like you!). Why is the COT report useful? First of all, if you're a scalper or a day trader, you had best look at other forex trading strategies, this one is for longer term forex traders (who hold onto positions for weeks or months)! The COT report is useful for long-term traders as it helps you identify extreme net long or net short positions.

And when you see such extreme positions, it usually means that a market reversal is just around the corner because if everyone is long a currency, who is left to buy? Nobody! And the same reasoning applies to short positions. Where do I find the COT report? The COT report is published every Friday at 20:30 PM (GMT) and features a snapshot of the previous Tuesday's activity. You can find it here on the: U. S. Commodity Futures Trading Commision (CFTC) webpage. Just scroll down to the " CURRENT LEGACY REPORTS " section and click on " Short Format " or click on the below picture. Example of the Chicago Mercantile Exchange report. As you can see, you have your Non-Commercial positions in the left columns, followed by the Commercial positions. Here you can see the number of long positions (in the above picture, each long or short position is for a contract worth 62,500 British pounds). The "open interest" number is the total number of open contracts (purchases and sales) made by all types of traders.

On the second line you see the changes from last week (this is great for seeing whether fund managers and hedgers are adding to their positions or easing off). On the last line you see the number of traders holding these positions. These are traders whose positions are large enough that they have to report them to the CFTC. The last columns on the right represent the positions by traders who are not required to disclose their positions to the CFTC (because they're not large enough). How do I interpret this data? You have to keep in mind what characterises the two groups of traders that hold the futures positions listed in that report. Because they are hedging (to protect themselves from a currency devaluation for example), the commercial traders are the most bullish at market bottoms and the most bearish at market peaks. On the other hand, the non-commercial traders , or speculators, are dedicated to following the trend, selling when the market is heading downward and buying when the market is going up. They keep adding to their positions until the price trend reverses. Their strategy often involves following moving averages. Let's look at a visual example to understand all of this: Above us, we have a weekly chart of the EURUSD pair. The two most important lines at the bottom are the blue one ( commercial traders which are hedging to protect themselves) and the green one ( non-commercial traders that are trying to profit by following the trend). Notice how they seem to mirror each other! From this chart we can see that non-commercial short positions hit an extreme low in Sept 2008; 2 months later, the EURUSD pair reversed and went up, as there was seemingly no one left to sell.

Conversely, non-commercial long positions hit an extreme high in October 2009; and again, 2 months later the EURUSD pair reversed and started falling, as there was apparently no one left who wanted to buy. There is an apparent 1 to 2 month lag between extremes on non-commercial traders' positions and the reversals of price. If you had recognised that the non-commercial speculators' short positions were at an extreme low in September 2008, and you had bought at the 1.26 level and sold when their long positions were at an extreme high in October 2009, you would have made 2400 pips ! Just the same, if you had recognised that the non-commercial speculators' long positions were at an extreme high in October 2009, and you had gone short at the 1.48 level and sold when their short positions were at an extreme low in March 2010, you would have made another 1200 pips ! 2 transactions worth a profit of 3,600 pips . not bad, eh?! Of course, it's hard to tell exactly when you've hit the actual extreme, so it's sometimes best to not do anything until the actual market reversal has been confirmed. As you can see, this is a great strategy for the long-term trader who is not in a hurry but wants to capture the full big moves of the market. Unfortunately, even though the COT report is free, it is only provided on a weekly basis, you would have to record the data yourself in an Excel spreadsheet to track the movements of non-commercial traders' long and short positions. However, since you only need those 2 numbers each week, this would only take one minute of your time each week - a small price to pay for all of those pips you can capture. Once again here are the links that you need to get this Commitments of Traders data: " > A very interesting article on the COT Report in which you will find a free Expert Advisor to see the COT report directly in MetaTrader 4. Commitment of Traders Report. The Commodity Futures Trading Commission, or CFTC, publishes the Commitment of Traders report (COT) every Friday, around 2:30 pm EST. Because the COT measures the net long and short positions taken by speculative traders and commercial traders, it is a great resource to gauge how heavily these market players are positioned in the market. Later on, we’ll let you meet these market players. These are the hedgers, large speculators, and retail traders .

Just like players in a team sport, each group has its unique characteristics and roles. By watching the behavior of these players, you’ll be able to foresee incoming changes in market sentiment. You’re probably asking yourself, “Why the heck do I need to use data from the FX futures market?” “Doesn’t the spot forex market have a report that measures how currency traders are positioned?” “I’m a spot forex trader! Activity in the futures market doesn’t involve me.” Remember, since spot forex is traded over-the-counter (OTC), transactions do not pass through a centralized exchange like the Chicago Mercantile Exchange. So what’s the closest thing we can get our hands on to see the state of the market and how the big players are moving their money? The Commitment of Traders report from the futures market. Before we dive into how to use the Commitment of Traders report as a forex trader, you have to first know WHERE to go to get the COT report and HOW to read it. Using the Commitment of Traders (COT) Report in Forex Trading.

While the Commitment of Traders (COT) Report is not an exact timing indicator, it can aid in forex trading and provide a context for current and future market movements. There are potentially many ways to use the COT Report for analyzing a forex pair. Here is one COT Report forex strategy, along with basics of what the COT report is, and why it is worth paying attention to. COT Report Basics for Forex Trading. Simply put, large traders and institutions must disclose their futures positions each Tuesday, which is called the “As of “date (currencies, or forex pairs, trade via futures market as well via the forex and cash markets). These positions are then revealed to the public each Friday, at 3:30 PM EST, in the COT report published by the Commodity Futures Trading Commission (CFTC). How these large traders and institutions are positioned gives insight into whether a trend is likely to continue or reverse. While the data only shows information on futures contracts, and not the transactions that occur in the forex market, the COT report is still a very good estimate of how other traders are positioned, and thus should be monitored by both currency futures traders and forex traders. Before going into COT Report forex strategies I want to briefly outline a few of the key elements. The COT Report has quite a bit of data, yet there is really only a few pieces of information I care about: the net position of Commercials, the net positions of Large Speculators, and how these positions have changed over time. Commercials are hedgers, businesses, producers, etc, who have large positions that are often offsetting another position or transaction. Commercials include importers or exporters who are hedging foreign currency exposure to control costs or normalize income.

As a group, these are counter trend traders. They can afford to hold positions against large trends because their transactions are often a hedge, and thus do not expose them to a direct loss. Think of a gold producer. They know they will be producing gold, and will need to sell it. They therefore sell gold futures to lock in a price that they can sell their gold at. If the price of gold goes up, they missed out on making more on their gold, but they still get to sell their gold at the price they locked in. If the price of gold goes down, they still get to sell at the price they locked in. The commercials are largely engaged in this type of trading. They do want to get a good price for whatever it is they are doing, but they are not typically speculating (although some may) on what the price will do, they are simply locking in prices (for commodities or currencies) to run their business. Large Speculators on the other hand are mostly hedge funds. Despite the name “hedge fund” these large speculators are rarely hedged, and therefore cannot sustain large losses or afford to trade against the trend. As a group Large Speculators are trend followers. Speculators are the people on the other side of the Commercial’s transactions.

Since Large Speculators are trend followers and much more sensitive to price movements (they are speculating and are therefore more likely to experience a direct loss of funds if a trade goes opposite to what they expect) than the Commercials, Large Speculators are the group of prime interest and the group on which our COT Report forex strategies are based. Calculating the net position over time “by hand” is possible as the reports are released weekly by the CFTC, but that is ultimately unnecessary. Using a COT Report chart is one of the easiest ways to track the data for trading purposes. COT Report data is chartable on barcharts. com. Select the futures contract you wish to view a chart of. The COT data is shown along the bottom of chart (we only care about the one that includes Large Spec., Small Spec, Comm Spec) The following is an example of a Euro (FX) futures chart showing the COT Report data along the bottom. The frequency of the chart is “weekly continuation” and the period is 5 years. (click to enlarge) In the chart above we can see the net positions of the Commercials (red) and Large Speculators (green). The chart shows that the speculators usually move with the price, and commercials against the price. When a line is below the “0” mark it means the net position is short, while above the “0” line means the net position is long. One other thing to note is that a currency future is relative to the US dollar. Therefore, the Euro future will move with the EURUSD.

The Canadian dollar future will move with the CADUSD, which is inverse to the USDCAD forex pair most forex traders are used to. When the USD is the second currency in the pair, the future and the currency pair will move in unison. In currency pairs where the USD is first, the futures will move opposite the pair, such as the case with the CAD futures. Remember this when analyzing COT data and acting on it in the forex market. By visually seeing the COT data in this way we can extract useful information, which then provides the basis for our COT Report forex strategy. COT Report Forex Trading – Extreme Levels Can Indicate a Reversal. When speculators are accumulating a position it can be a confirmation that there is interest in the trend. If shorts are being accumulated as the price drops, or if long positions are being accumulated as the price rises, this can be a good sign the trend will continue. But speculators have a limit–they can’t purchase or sell indefinitely. They may run out of money, simply wish to take profit (or losses) or may no longer feel as much conviction to keep buying at higher prices or selling at lower prices. When speculators are tapped out, want out or don’t want to invest anymore, there is nowhere left for the price to go, but to reverse. Therefore, the COT data can be used as a type of “overboughtoversold” indicator in terms of the health of the traders within the market. Each futures market will be a bit different, but critical COT levels will often repeat and indicate when speculators are overextended.

The Euro futures chart above shows that when speculators were 200,000 contracts short, or close to it, this generally resulted in a price reversal to the upside over time these extreme levels may continue to push outwards. It is not a single level that is important (200,000 contracts, for example) but rather watching for new extremes, and then reversals in price and COT direction after those extremes start to show up. This method is not recommended for a top or bottom picking strategy; it can be used to provide a context for other analysis and be used to confirm reversals in price though. Extreme levels can look easy to isolate in hindsight, but are not ideal timing indicators. That said, it is very useful for alerting traders when a reversal could be nearby. The COT data should not be acted on alone though; wait for price to confirm a potential reversal signal in the COT data (more on this later). Let’s look at another example, and see how the COT data could have aided in making a trading decision. The chart below shows Canadian dollar futures (D6), along with COT data. We can see that the Canadian dollar was in a long term decline versus the US dollar (futures contracts are traded against the USD, unless otherwise stated). In 2015, Large Specs had accumulated a short position close to -65,000 contracts. This only resulted in a minor bump up in price. In early 2016, the same short position resulted in a much larger up move. Of note is that this is when oil started to bounce, and the Canadian economy is heavily dependent on the price of oil. The rise in oil combined with an extreme reading on the Large Specs pointed to a move higher in the Canadian dollar. (click to enlarge) Ultimately though, we want price action to help confirm our trades. While those COT levels in 2015 and 2016 were more extreme than what we had seen in the past, it would have been relatively hard to make a trade based on them…

unless you were also looking at oil and making a determination that it was likely to turn higher, which would bolster the Canadian dollar in early 2016. With a few data points behind us for reference, the next major opportunity to use the COT came in 2017. But first a bit of context. In 2016 the price shot up, and the up move has larger than the last swing to the downside (Sept ’15 to Jan ’16). That is a very positive price action signal. It indicates that the downtrend may be over. But we want more evidence, which is why I usually wait for a pullback before taking trade (with most of my strategies). Throughout out 2016 and into 2017 we have a very lengthy and slow-moving decline. It is a much weaker down move than the prior up move. That’s another positive sign (read Price Action Trading with Velocity and Magnitude). Based on the price action, the stage is set. We have two compelling price action reasons to consider a long trade. In May, COT Large Spec short positions increase to well below the -65,000 point of interest. The position ultimately reaches -99,000 in late May. By mid-June that short position has decreased to below 90,000 and the position moves up toward zero every week after, showing that the Large Specs are quickly shifting their bias.

Price is also rising during this time. If we zero in on a daily chart we can see some possible trade locations. The first would been at the bottom of this weak descending channel. Remember, based on the price action we were expecting another move higher, and at this point the COT is at an extreme reading, confirming a move to the upside is likely coming. (click to enlarge) The price consolidates at the bottom of the channel, and then breaks above that consolidation, providing the first possible entry into a long trade (note that at this point, the Large Specs were still increasing their short position). For those who have read my Forex Strategies Guide, this would be a Front-Running trade. The price then rallies to the top of the channel, and consolidates. At this point the Large Specs are starting to buy (short position is moving back toward zero). So price and COT are confirming a move up. The price breaks higher out of the consolidation and the descending channel, signaling another possible trade. Since that time, the Large Specs have become bullish, flipping from short to long. This has helped fuel the rally, which is why we want to anticipate what these guys will do, and we do that by knowing that a big reversal is often coming when these these Large Spec positions are near extremes. The above chart is a futures chart though, not a forex chart. If you are trading the USDCAD, the same analysis would apply, but it would be flipped upside down. Remember, we were expecting the CAD to increase in 2017, based on price action and COT data.

If we expect the CAD to go up, what will the USDCAD do? It will fall, because if the CAD goes up, the USD goes down. The same trades and setups are present on the USDCAD chart, except we would have been going short the USDCAD (which is equivalent to going long the CADUSD or CAD futures). (click to enlarge) Trading With COT Extremes – Warnings. Have other pieces of evidence that help confirm a trade. It isn’t wise to just assume the price will reverse because the Large Specs are near a historically extreme level. Over time, these extreme levels tend to expand. In the CAD futures chart above, -99,000 was extreme. That may hold in the future as well, but several years down the road new extremes may be hit at 125,000 or 150,000. Positions can also stay near extreme levels for extended periods of time, without causing a price reversal. That is why we need other pieces of evidence. The extreme COT alerts us to a possible trade (or to avoid a trade) but it doesn’t SIGNAL a trade. This article is focused on COT, and how it can be used as an additional piece of evidence for taking trades. The article did not discuss stop loss levels or profit targets (taking profits). These are elements of a trading strategy, and should be considered on each trade before placing it. COT data is not a strategy in and out of itself, rather it is just a tool that can be combined with a trading strategy and trading plan.

IF THE COT IS NOT NEAR AN EXTREME, I DO NOT CONSIDER IT IN MY TRADING DECISIONS. I wouldn’t over-use this indicator. If you get a valid trade signal based on your strategies, and the COT data isn’t near an extreme, that doesn’t mean you shouldn’t take your trade signal. COT data is just an extra piece of data. If I get a valid trade signal, I take it. It’s just that occasionally COT may help in analyzing or confirming (or rejecting) trades. But as we can see from the CAD example, the COT data was only relevant (to how I trade) a few times over the last several years. It is still worth paying attention to, because when price action and extreme COT levels collide, it lets you know the likely direction of a major move. When looking at COT data, start with at least a 10 year chart for picking out extreme levels . Prior extreme long and short Long Spec positions are areas of interest, but remember these tend to expand outward over time. Make a note of these extreme levels, and then watch for trade signals as the price nears or exceeds these levels. If you only look at extreme levels on a 1 or 2 year chart, you may be missing historically significant information.

If we look at a CAD futures chart (with COT data) going back to 2007, we would see that 65,000 to 100,000 contract positions had been significant in the past as well. COT Report Forex Trading – Conclusion. One way I like to use COT data on my chart is to look for extremes in Large Spec. positions. While it isn’t an exact timing indicator, if other conditions align and I get a valid trade setup, an extreme level on the COT can often mean a sharp and large price reversal. Since we know that extreme COT levels often cause the price to move in the opposite direction of the recent trend, we gain insight into what direction we want to be trading before the reversal actually occurs. As COT levels reach extremes, it can also warn us to avoid trading in that trend direction, as it may be ripe for a reversal. Just because a COT reading is at or near an extreme doesn’t mean the price will have a massive reversal. Sometimes we have positions stay at extreme levels for long periods of time, and the price continues to move in the trend direction without any major price reversals. This is why we don’t use the COT in isolation. We want to combine this approach with other technical or fundamental approaches, and ideally with specific price action strategies (that confirm when the price reversal may be starting).

For other forex trading strategies, check out the Forex Trading Strategies Guide for Day and Swing Traders eBook, by Cory Mitchell. At over 300 pages, and including more than 20 strategies, it is more than an eBook…it’s a complete course on forex trading. By Cory Mitchell, CMT. Some other articles you may enjoy: High Probability Forex Engulfing Candle Trading Strategy – A trading strategy using engulfing candles as an entry point into a defined trend. Useful for noting the transition from pullback to trend. Provides an alternate entry method compared to the “traditional” approach. ABC Forex Trading Strategy – (Video) – A simple but powerful price pattern seen in all markets; it gets you in in the direction of strong momentum. How to Identify a Trend Change in Real-Time (video) – A look at how to monitor real-time changes in direction.



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