Weekly COT report Analysis + Trade Ideas

The Commitment Of Trader (COT) report provides some positioning information about the futures market and it is one of the most underrated tools that forex traders can make use of to increase their trading performance.The report is compiled and released weekly by the Commodity Futures Trading Commission (CFTC) in the United States every Friday at 15:30 Eastern Time, and records open interest information about the futures market based on the previous Tuesday. Anyone can access the COT report for free on the CFTC website(www.cftc.gov/cftc/cftccotreports.htm).

COT report usually shows you how the big guns are playing their cards and in my experience it can be used to in different ways to make your trade calls more profitable.I do not intend to reinvent the wheel. I look at the similar thread topics in FF to see if enyone else has come up with a discussion or analysis of COT report. I have not seen any so I decide to open this thread and provide some insight and materials (which you can get from readying some good trading books) about COT report and share some of my experience and ideas in this regard.

Well, back to COT report and how to use it COT report arrives three days late but the information nonetheless can be
helpful since many traders spend their weekend analyzing the COT report. The time lag between reporting and release is the main handicap of the COT data, but despite this limitation, you can still use it as a sentiment tool.In this report you can see the long and short positions held by traders in each of the three main categories defined by the CFTC.These categories are:

Commercial:This group consists of market participants who use the futures contracts for hedging purposes, and these commercial participants are generally exporters and importers who are hedging against currency fluctuations.
Non-commercial/Large Traders:This group consists of large speculators such as hedge funds, banks and so on who use currency futures just for speculation
Non-reportable/Small Speculators:

This group consists of small speculators like retail traders.

The COT report tells you the long and short positions undertaken by participants from each category.When it comes to analyzing information pertaining to currency futures in the COT report, it is generally more relevant for traders to focus on the noncommercial/Large Traders
participants rather than on the commercial participants. The reason behind this is that these large speculators trade the futures contracts mainly for profits,and do not have the intention to take delivery of the underlying asset, which in this case would be cash. On the other hand, commercial participants tend to maintain and roll over the same amount of contracts from month to month for hedging purposes even though these positions could be in losses. Large speculators, however, will usually close their losing positions instead of rolling them over to the next month.


The COT report allows you to gauge market sentiment in the currency futures market, which also influences the spot forex market. Currency futures are basically spot prices which are adjusted by the forwards (derived by interest rate differentials) to arrive at a future delivery price. Unlike spot forex which does not have a centralised exchange at the time of writing, currency futures are cleared at the Chicago Mercantile Exchange.One of the many differences between spot forex and currency futures lies in their quoting convention. In the currency futures market, currency futures are mostly quoted as the foreign currency directly against the US dollar, so the price quotation is inverse in USDCHF and USDJPY and USDCAD.Please note that difference while analyzing the COT report.
What I use to set up my trade ideas are the net positions held by noncommercial/Large Traders and COT index.COT index represent the percentage of the current COT net position when compared to 13 weeks range of the COT net positions.(different setting are also used like 26 weeks or 52 weeks but I prefere the 13 weeks).
Trend Following Model Vs Countertrend trades: the net position (long/short) can be used to trade in the right side of the market and COT index extremes can be used to trade the reversals.Note that COT Index ranges from 0 to 100.Having said that, COT Index reading close to 0 means short extreme and reading close to 100 means long extreme ;therefore a pending reversal would be the trade set up.The Conceptual frame work that I use as trading is

1-The Set up Condition: decide you want to go long or short (or sometimes just stand aside) based on your analysis.Here we use COT net positions & COT Index to make our desicion.

2- The Entry: the point you enter the market. I usully do it with use of technical analysis:

1-Break Out scenario: the Support and Resistance Break out. I place pending Sell/Buy Stop Order at predetremined break out point.

2-Buy dip/Sell High (Trend Following Model): I place pending Sell/Buy limit Order at previous Support now turns Resistance point (or visa versa).

3-STOP LOSS: the invalidation point ,which you must get out of the trade no matter what.(based on S/R)

4-Take Profit/Exit Strategy: where you can close your profitable position or you should exit from your position.(Take profit point can be set up in advance base on S/R or Fibonacci extention but you should always watch you trade as the market tends to surprise most of the time).

What I do here are:
1- to analysis the weekly COT net position & COT index reading

2-to make some trade ideas based on COT analysis (the Set Up Condition) and to suggest entry point (the Entry) based on my own technical analysis.

I try to make the trade calls as pending orders as we all know no one can watch the markets 24/7 (one funny thing is that I had more winning trades this way while I'm sleeping!!) and I try to update the trades which are in progress or being invalidated.
The pairs that I discuss here are EURUSD-GBPUSD-USDCHF (inverse here)-USDJPY (inverse)-USDCAD (inverse) and my all time favorites AUDUSD and GOLD





I think of having a report of the trade recommendations and their status here to see what we have done so far.

Closed position
SHORT AUDUSD from .9150 (+ 500 pips) .TP=.8650
SHORT GBPUSD from 1.6210 (+300 pips) . TP=1.5910
LONG GOLD from 1090 (+250 pips). TP at 1115
SHORT GOLD from 1115(+200 pips ) .TP at 1095 , .... what a bad TP ,the call almost made +500 pips
SHORT AUDUSD from .8755 stopped at B/E
LONG USDCAD from 1.0415 (+225 pips), closed at 1.0640
LONG EURGBP from .8680 (+90 pips), closed at .8770
LONG EURUSD from 1.3750 stopped at B/E
SHORT USDCHF from 1.0700 stopped at B/E
LONG AUDUSD from .8760 (+110 pips) closed at .8870
SHORT USDCAD from 1.0640 (+220 pips) closed at 1.0420
LONG EURUSD at 1.3700 ,Stopped at B/E
SHORT GOLD from 1115 (+150 pips) 1st TP at 1100
SHORT GOLD from 1115 ,2nd Target didnt hit, Stopped at B/E
LONG USDCAD from 1.04200 Stopped at B/E
SHORT GBPUSD from 1.5790 (+365 pips) Closed at 1.5425
LONG EURUSD from 1.3660 (-90) stopped at 1.3570
SHORT USDCHF from 1.0735 (-65 )stopped at 1.080
LONG USDJPY from .9125 (-75 pips) stopped at 90.50
SHORT USDJPY from 90.50 1TP at 89.70 (+80 pips)
SHORT USDJPY from 90.50 2nTP didnt hit Stopped at B/E
LONG GBPUSD from 1.4980 (-80 pips) Stopped at 1.4900
LONG GOLD from 1112 (+120 pips) 1st TP at 1124
LONG GOLD from 1112 (+40 pips) Stopped at 1116 SL
SHORT AUDUSD from .9190 ( +70pips) TP at .9120
SHORT AUDJPY from 83.30 (+100 pips) TP at 82.30
LONG GOLD from 1108 stopped at B/E
LONG USDCAD from 1.0250 (-30 pips) closed at 1.0220
LONG USDCAD from 1.01745 (+75 pips) closed at 1.0220
SHORT AUDUSD from .9150 ( +50 pips) closed at .9100
SHORT AUDUSD from .9190 (+90pips) closed at .9100
SHORT EURUSD from 1.3757 (+100 pips ) closed at 1.3657
SHORT EURUSD from 1.3785 ( +128 pips ) closed at 1.3657
SHORT USDCAD from 1.0220 (+80 pips) closed at 1.0140
LONG AUDUSD from .9100 (+50 pips) closed at .9150
SHORT USDCHF from .10640 (+90 pips) closed at 1.0550
SHORT USDCHF from .10640 (+125 pips) TP at 1.0515
SHORT GBPJPY from 139.12 TP at 137.62 (+150 pips)
LONG USDCHF a 1.0515 1st TP at 1.0615 (+100 pips)
SHORT USDCAD from 1.0220 (+70 pips) Closed at 1.0150
LONG AUDUSD from .9100 (+100 pips) closed at .9200
SHORT EURGBP from .9085 (+100 pips) closed at .8985
LONG USDCAD from 1.0070 (+90 pip ) closed at 1.0160
SHORT AUDUSD from .9165 Stopped at B/E
SHORT GBPUSD from 1.5110 1stTP at 1.5010 (+100pips)
LONG EURGBP from .9000 half closed at .9030 (+30 pips)
LONG EURGBP from .9000 half closed at B/E
SHORT EURUSD from 1.3515 closed at 1.3535 (-20 pips)
LONG USDCHF at 1.0515 (+165 pips) TP at 1.0680
SHORT GBPUSD from 1.5110 (+210 pips) TP at 1.49
SHORT USDJPY from 91.85 closed at B/E
SHORT NZDUSD from .7030 and .7060 (-50 and -20 pips) stopped at .7080
SHORT EURUSD from 1.3350 closed at 1.3290 (+60 pips)
LONG USDCAD from 1.0230 closed half at 1.0280 (+50 pips), half B/E
SHORT AUDUSD from .9130 closed at .9040 and .9060 (+90, 70 pips)
LONG USDCHF from 1.0680 (-30 pips) stopped at 1.0650 (2 positions = -60 pips)
SHORT USDJPY from 92.80 closed half at 92.40 (+40 pips)
LONG USDCHF from 1.0640 Stopped at 1.0590 (-50*2=-100 pips)
SHORT EURUSD at 1.3440-60 ,75 close at 1.3420 (+20,40,55 = +115 pips)
SHORT GBPUSD at 1.4950 closed at 1.4910 (+40 pips)
SHORT AUDUSD from .9075-90-.9105 stopped at .9150 (-75,-60,-45= -180 pips)
SHORT AUDUSD from .9175 (-25*2=50 pips ) stopped at .92
SHORT GBPUSD from .14980 (-50 pips) stopped at 1.5030
SHORT EURUSD from 1.3520 closed at 1.3450 (+70 pips)
LONG USDCHF from 1.0650 Stopped at 1.0575 (-75 pips)
SHORT AUDUSD from .9150 stopped at .9175 (-25*2=-50 pips)
LONG USDCHF at 1.0525 stopped at 1.490 (-35*2=-70 pips)
SHORT GOLD from 1116 closed at B/E
LONG USDJPY at 92.94 (+170 pips) 1/3 TP at 94.54
LONG USDCAD from 1.0085 half close ad 1.0115 (+30 pips),half closed at B/E
SHORT GBPJPY from 143.50 half close at 143 (+50 pips)
SHORT GBPJPY from 143.50 (-100 pips) half stopped at 144.50
SHORT AUDUSD from .9200 closed at B/E
SHORT EURUSD from 1.3488 half closed at 1.3388 (+100 pips)
SHORT GBPUSD from 1.5225 stopped at 1.5250 (-25*2=-50 pips)
SHORT AUDUSD from .9150 stopped at .9275 (-25*2=-50 pips)
LONG USDJPY at 92.94 2/3 clsoed at 93.80 (96*2=+192 pips)
SHORT NZDUSD .7070 closed at .7030 (40*2=+80 pips)
LONG USDCAD from .9997 stopped at .9980 (-17*2=-34 pips)
LONG USDJPY at 93.80 closed at 94.20 (40*2=+80)
LONG EURJPY at 125.20 closed at 126 ,125.60 (+80,40=+120 pips)
SHORT GBPUSD at 1.5235 closed at 1.5145 (90*2=+180 pips)
SHORT AUDUSD from .9280 closed at .9260 (20*2=+40 pips)
SHORT USDJPY from 93.30 stopped at 93.10 (-20*2=-40 pips)
SHORT GBPUSD from 1.5269 closed at 1.5159 (+110*2=+220 pips)
SHORT EURUSD from 1.3488 (+188 pips) closed at 1.3300
LONG USDCAD from 1.0045 (40*2=+80 pips) closed at 1.0085
SHORT AUDUSD from .9247 stopped at .9287 (-40*2=-80 pips)
LONG USDJPY from 92.90 closed at 93.50 (+60*2=+120pips)
SHORT EURUSD from 1.3357 ,13397 stopped at 1.3417 (-60,-20pips)
LONG USDCHF from 1.0720 stopped at 1.0690 (-30*2=-60 pips)
SHORT GBPUSD at 1.5370 closed at 1.5335 (+35*2=+70 pips)
SHORT GOLD at 1159-60 closed at 1161 (-20,-10 pips)
SHORT AUDSUD from .9329 closed at .9320 (+9*2=+18 pips)
SHORT NZDUSD from .7070 clsoed at .7045 (+25*2=+50 pips)
SHORT GOLD from 1210 half closed at 1190 (+200pips) half stopped at B/E
LONG USDCAD from 1.0225 closed at B/E
SHORT EURJPY from 121.25 & 121.50 closed at 118.57 (+268, +293 pips)
SHORT EURUSD from 1.2395 closed at 1.2200 (+195 pips)
SHORT AUDCAD from .9150 closed at .88 (+350 pips)
SHORT AUDUSD from .8850 closed at .8280 (+570 pips)
SHORT EURUSD from 1.2380 closed at 1.2355 (+25 pips)
SHORT GBPJPY from 132 closed at 130.30 and 1.28 (+170, 400 pips)
SHORT GBPCAD from 1.500 closed at 1.5200 (-200pips)
LONG USDCAD from 1.0350 closed at 1.0650 (+300 pips)
SHORT EURCHF from 1.4565 closed at 1.4440 (+125 pips)
SHORT USDCHF stopped at 1.1610 (-100 pips)
LONG GOLD from 1175 closed at 1195 (+200 pips)


TOTAL PROFIT/LOSS : +8,083 pips since Jan 17 10


Open positions:



Pending Orders

Note the inverse quotation.

Net position in CADUSD future contracts were increased from previous week (ending Jan 8) to current week (ending Jan 15) from 40,916 to 48,695.Considering the fact that this reading is the highest one during last year it can be suggested that we are getting close to a long extreme in CADUSD (short extreme in USDCAD).

Note the invesre price quotation
the COT index reading (13 weeks) is 100 at the current week (ending Jan 15) comparing to 81.99 of the last week (ending Jan 8)
I think what we are watching is a topping activity in CADUSD (bottoming in USDCAD)

According to the tradying model that what I am going to do here the Set Up Condition for USDCAD is a Long one.
looking at the weekly chart a double bottom may be on the card if the Old Resistance now truns Support around 1.0200-1.0275 holds.Having said that I suggest to Buy at the break of the Resistance line at 1.0415

Net position in AUDUSD future contracts were increased from previous week (ending Jan 8) to current week (ending Jan 15) from 47,108 to 59,352.Considering the fact that this readying is the highest one during last year it can be suggested that we are getting close to a long extreme in AUDUSD.
COT Index Reading (2nd chart below) increased during previous week (ending Jan 8) to current week (ending Jan 15) from 68.09 to 100.I think with this extreme COT Index we are going to see a top in place sooner than later.

The Set up Condition is a Short one.
What I see in AUDUSD chart is a bit confusing now.I see a would-be ascending traingle development in 4hr chart.I personally like to see a terminal thrust to .9450 before shorting this pair but in any case if we see a clear break of S at .9150 the bearish count is valid and will provide some nice downside ride considering all the SL that are placed in the way down

Net short position in EURUSD future contracts were decreased from previous week (ending Jan 8) to current week (ending Jan 15) from -35,788 to -17,917. It should be noted that the net EURUSD postions has turned negative from positive since Dec 15.I think the fact that the market is still beairsh on EURUSD shows more downside potential on the pair.

Note the COT Index reading for the previous weeks.At first we see a COT Index of 0 for the period Dec 15 to 21 ,it might seem bullish at first but when comparing to the net positions change from positive to negative the implication would be bearish due to change in the positioning, and that's the reason behind 0 reading. then we see a COT Index reading more than 0 and again turning to 0 which means a Short extreme reading at the 2nd 0 reading and consequently the upward correction took place during last two weeks.right now there is nothing very particular about the COT Index reading as far as I'm concern despite the fact that the rallies to the up side might be treated as selling opportunities;however an appropriate SL is needed as there is a slim chance of turning to net long position in upcoming weeks

I went short last week at 1.4520 due to R at upper line of the correction channel, I think a sell limit order at R now S around 1.4450 might provide some good short opportunities. If the R at 1.4577 cant hold the next nice selling opportunity is around 1.4700 at the retest of the major S now truns R

Nice, a COT thread.

how long have you been trading with COTs?

Thanx, I've been using it about one year and half. I should say it's not the only tool that I use. I use five different ways to approach the market and decide on a Set Up Condition.they are:
1-Subjective analysis ,such as EW/Fib/Classic & Harmonic patterns
2-Indicator based: LSR/ and classic /hidden divergence
3-Chart based: S/R level/ S>R and reverse
4-Trend Following Model (TFM)/ I came up with this method while ago and very reliable.I'll explain it on another thread later on
5-COT+technical which I'm explaing here

According to COT report Larg Traders are still holding net short GBPUSD position and they added to them during previous week.Net short postions are increased from -33,654 to -35,467. Considering the price moved higher last week ,it suggests the big guns are selling higher price in GBPUSD,however, I'm not very convinced to be too bearish on GBP this week unless we see relatively higher price first.

Looking at COT Index making the pic at GBPUSD more complicated. The reading was decreased during previous week from 54 to 23. The reading is getting close to be short extreme while the price are heading higher.I think Large Traders are betting against Cable while the price doesnt move at their desired direction.I personally prefer to stand aside for now.

As I said before I prefer to stand aside on GBPUSD for the time being.
It seems the level of 1.62 acts like a Support and Resistance multiple times and it has recently happened as you can see on the chart.I may conisder a short on the break of S at 1.6200 but it's not a very confident set up.

sweet

look forward to your analysis.

i was trained by larry williams. i use COT data as the basis for my trading.

i don't really follow the forums, i just use FF for news, but if you want to chat, send me an email or pm

that's great. I read some of Larry's material ,they are quite useful, however I still have issue with the idea about the crossing of commercial and non-commercial positions to initiate a trade.I'd be happy if you share some of the things you have learnt from him.

I just read today article by Boris Schlossberg at fx360.As it's related to the topic of this thread I share it here:
"According to the latest CFCT Commitment of traders data short positions in the US dollar increased by factor of six last week to 67,500 rising to their highest level in a month. The positioning suggests that speculators are anticipating further dollar weakness in the week ahead, but their short bias may be subject to a squeeze if risk aversion flows reappear.With the exception of Australia which reported very strong labor data last week, economic new from the rest of G-20 block was generally disappointing. In UK Manufacturing and Industrial Production reports missed expecations, in Eurozone the Trade Balance printed weaker than expected as higher currency rates finally took their toll on trade and in US the Retail Sales numbers shocked to the downside at -0.3% versus 0.4%. Meanwhile equities appear to have stalled at the 10,700 level for the DJIA despite strong earnings data from financials and high tech sectors as the index tumbled more than 100 points on Friday.This week the economic calendar is relatively light once again, but there are several key reports that could impact the market. In UK the claimant count and retail sales numbers will be key to setting the tone in the pound. In EU the flash PMI data for January will offer the latest evidence of strength or weakness of the recovery in the 16 member union and in US the weekly jobless numbers could be key in determining whether the improvement in labor markets has ended. If the economic news this week surprises to the downside triggering further profit taking in equities, the greenback could see a rally on safe haven flows as specs are forced to unwind their freshly laid dollar shorts"

Hi Shahab - nice thread. Hope you don't mind me posting in here (non COT stuff that is) but I know you liked to read the reports that I used to post in the AUD thread so thought I would post the weekly run-down report in here for you. Too much noise over there now

Weekly candle on USDX is looking mighty fine. I can't see why we can't test 80.00 over next few weeks. What do you think?

Hi patience, thanx for your post, you are welcome anytime
the report is useful as always , I read briefly the post in AUSUSD thread ,moslty your posts and few others who post good analysis or charts.
Well about this thread I said it would break out last weak and I wrote the break out point ,which they played out pretty well but I've not seen any interest in COT so far,I try to make it updated everyweek but couldnt find time this week.
about the USDX, I think the market is nervous , and everone fears the next big leg down for equities, which will be USD positive and bring a rally like Q3 2008,here I see lots of new foreclosure on commercial properties going on ,weak housing market and high rate of unemployment affect this country, I wont be suprise to see EURUSD at 1.25 before Q3 2010.

According to COT report this week large institutes added to their short EURUSD positions from 25,282 to 39,359 .the market is net short and the short side is getting more crowded while we are heading lower the COT index (13 weeks) reading is 0 (bearish extreme) which warns of a reversal in the down trend.please note that the extreme reading might be in place when the market is falling this sharp till finding a base.