The Commitment of Traders (COT) report is a weekly publication that shows the aggregate holdings of different types of participants in the U.S. futures market.
The report is subject to controversy among Forex traders with some as presumptive as to state that it would provide a glimpse in the future over a potential reversal.
The Commitment of Traders report is published every Friday by the Commodity Futures Trading Commission (CFTC) at 3:30 Eastern time and is a snapshot of the commitment of the classified trading groups as of the Tuesday that same week.
The report is easily accessible at the following link:
https://www.cftc.gov/MarketReports/CommitmentsofTraders/index.htm
Just scroll down until you reach the Current Legacy Reports section as shown below:
Choose the report from Chicago Mercantile Exchange, short format as illustrated in the chart above.
Once you click, you will see a list that looks similar to the excerpt below. Keep your calm while you tap Ctrl+F and search for the currency that you are interested in, let’s say the sterling;
You find the EUR/GBP Futures contracts on the 5/07/19:
Interpreting the COT Report
Main market participants are:
Commercial
Large corporations that use currency futures to hedge and protect themselves from too much exchange rate fluctuation (currency/translation risk).
Non-Commercial:
The group is compromised of the following categories of traders:
a) Individual traders;
b) Hedge Funds;
c) Financial Institutions.
For the most part these are traders that are looking to trade for speculative gains.
It is said that the small speculators/ individual traders hover either on the wrong side of the market, either at market tops or bottoms.
These traders cannot significantly influence the overall direction of the market.
Other information in the report as shown above:
Position in the market:
Long: number of long/buy positions;
Short: number of short/sell positions;
Open interest: This column represents the number of contracts out there that have not been exercised or delivered.
Number of traders: This is the total number of traders who are required to report positions to the CFTC.
Reportable positions: The number of options and futures positions that are required to be reported according to CFTC regulations.
Non-reportable positions: The number of open interest positions that do not meet the reportable requirements of the CFTC like retail traders.
Finally!
Market sentiment is usually gauged by using the data above and computing the percent the ratio of long/short positions and total number of positions taken by means of futures contracts as present in the report:
%Long = Number of long positions/Total number of positions
%Short = Number of short positions/ Total Number of Positions
For the example given above EUR/GBP
ú %Long = 0.4266
ú %Short = 0.57337
The overall evaluation of the market sentiment would be inclined towards a soft bearish climate for the EUR/GBP pair.
Many years ago, at my sting at trading I have stumbled upon a strategy that, although risky, does wonders in conjunction with the evaluation from the COT report: “Trading the 10 o’clock bulls – Winning strategies for active traders” by Geoff Bysshe.
The strategy is a market classic and dates back to the early beginnings of the NYSE in which the overall trend of a stock for an entire day would be revealed during the first hour of trade.
As the author states “market sentiment is the driving force behind any market move”.
So how does it work?
We set our minds to a certain market: let’s say we trade on the London Stock Exchange and we want to make money off of the EUR/GBP.
First thing is take a note of the first 30 minutes of trading High and Low and check whether the value of the range does confirm the overall determined bearish market sentiment.
If so, we also check whether the Pivot Point of the previous day would be closer to the upper value or lower value of the opening range.
If the value of the pivot point is part of the lower range or even lower (better) then we open up a pending order for the value of the first low and we set the take profit to 20 pips or 30 pips below while we try to exit at 10 pips below the initial value of the trade.
Pivot Point = Prev Day (H+L+C)/3
The strategy above guarantees you have a good position in the market and is a great angle that can be used when trading binaries!
The report is subject to controversy among Forex traders with some as presumptive as to state that it would provide a glimpse in the future over a potential reversal.
The Commitment of Traders report is published every Friday by the Commodity Futures Trading Commission (CFTC) at 3:30 Eastern time and is a snapshot of the commitment of the classified trading groups as of the Tuesday that same week.
The report is easily accessible at the following link:
https://www.cftc.gov/MarketReports/CommitmentsofTraders/index.htm
Just scroll down until you reach the Current Legacy Reports section as shown below:
Choose the report from Chicago Mercantile Exchange, short format as illustrated in the chart above.
Once you click, you will see a list that looks similar to the excerpt below. Keep your calm while you tap Ctrl+F and search for the currency that you are interested in, let’s say the sterling;
You find the EUR/GBP Futures contracts on the 5/07/19:
Interpreting the COT Report
Main market participants are:
Commercial
Large corporations that use currency futures to hedge and protect themselves from too much exchange rate fluctuation (currency/translation risk).
Non-Commercial:
The group is compromised of the following categories of traders:
a) Individual traders;
b) Hedge Funds;
c) Financial Institutions.
For the most part these are traders that are looking to trade for speculative gains.
It is said that the small speculators/ individual traders hover either on the wrong side of the market, either at market tops or bottoms.
These traders cannot significantly influence the overall direction of the market.
Other information in the report as shown above:
Position in the market:
Long: number of long/buy positions;
Short: number of short/sell positions;
Open interest: This column represents the number of contracts out there that have not been exercised or delivered.
Number of traders: This is the total number of traders who are required to report positions to the CFTC.
Reportable positions: The number of options and futures positions that are required to be reported according to CFTC regulations.
Non-reportable positions: The number of open interest positions that do not meet the reportable requirements of the CFTC like retail traders.
Finally!
Market sentiment is usually gauged by using the data above and computing the percent the ratio of long/short positions and total number of positions taken by means of futures contracts as present in the report:
%Long = Number of long positions/Total number of positions
%Short = Number of short positions/ Total Number of Positions
For the example given above EUR/GBP
ú %Long = 0.4266
ú %Short = 0.57337
The overall evaluation of the market sentiment would be inclined towards a soft bearish climate for the EUR/GBP pair.
Many years ago, at my sting at trading I have stumbled upon a strategy that, although risky, does wonders in conjunction with the evaluation from the COT report: “Trading the 10 o’clock bulls – Winning strategies for active traders” by Geoff Bysshe.
The strategy is a market classic and dates back to the early beginnings of the NYSE in which the overall trend of a stock for an entire day would be revealed during the first hour of trade.
As the author states “market sentiment is the driving force behind any market move”.
So how does it work?
We set our minds to a certain market: let’s say we trade on the London Stock Exchange and we want to make money off of the EUR/GBP.
First thing is take a note of the first 30 minutes of trading High and Low and check whether the value of the range does confirm the overall determined bearish market sentiment.
If so, we also check whether the Pivot Point of the previous day would be closer to the upper value or lower value of the opening range.
If the value of the pivot point is part of the lower range or even lower (better) then we open up a pending order for the value of the first low and we set the take profit to 20 pips or 30 pips below while we try to exit at 10 pips below the initial value of the trade.
Pivot Point = Prev Day (H+L+C)/3
The strategy above guarantees you have a good position in the market and is a great angle that can be used when trading binaries!