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:
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 Tradersparticipants 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