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Another way to trade PA profitably

  • #21
  • Aug 24, 2007 3:36pm Aug 24, 2007 3:36pm
Floyd Upperman (who has been mentioned by Williams), stated in 2006 that an analysis of COT data for currencies is “not helpful”.

He stated that only a “fraction” of open interest in the $1.9 tril spot market is represented in the report (mainly CBOT).

Accurate assessment ???

Is there a way to determine what the actual ‘fraction’ would be? 1/16th … 1/3rd ?

Based on the thread starter … there appears to be a correlation with just this ‘fraction’ of data. My question is … would this be a play on a probability that all the other open interest not captured is mirroring the COT figures?
  • #22
  • Aug 24, 2007 3:40pm Aug 24, 2007 3:40pm
Quoting imbiber
What time on Friday is the new data released?
From CFTC:
Quote

"..These reports are released on a weekly or monthly basis to provide information to industry participants and the public about the futures and options markets.
Commitments of Traders
These reports are released each Friday at 3:30 P.M. and 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."

Unquote

Sometimes (but very seldom!) these reports may be published with a day or 2 delay. However, pretty much consistent over a long term.
I am a very humble trader Up 380 pips - two trades.
  • #23
  • Aug 24, 2007 4:11pm Aug 24, 2007 4:11pm
Quoting howard
Therefore, does this mean that JPY will be going up and UJ moving down?
no, UJ should be going up, as it has been this week. Because JPY are shorted and will therefore depreciate against the dollar.
Take a report.
  • #24
  • Aug 24, 2007 4:16pm Aug 24, 2007 4:16pm
Quoting Rustbelt
Floyd Upperman (who has been mentioned by Williams), stated in 2006 that an analysis of COT data for currencies is “not helpful”.

He stated that only a “fraction” of open interest in the $1.9 tril spot market is represented in the report (mainly CBOT).

Accurate assessment ???

Is there a way to determine what the actual ‘fraction’ would be? 1/16th … 1/3rd ?

Based on the thread starter … there appears to be a correlation with just this ‘fraction’ of data. My question is … would this be a play on a probability that all the other open interest not captured is mirroring the COT figures?
Tell Upperman I'd like to kick his ass. just kidding. maybe it's not funny. ok whatever.

anyway, COTs are designed to represent 70%(or 80%, I don't remember the exact figure but it should be on the CFTC website) of the market at any time. And from past experiences I would say it is pretty damn accurate. So I would care less what Upperman says.
Take a report.
  • #25
  • Aug 24, 2007 4:29pm Aug 24, 2007 4:29pm
"anyway, COTs are designed to represent 70%(or 80%, I don't remember the exact figure but it should be on the CFTC website) of the market at any time. And from past experiences I would say it is pretty damn accurate. So I would care less what Upperman says"

Is this 70%-80% of the market under the jurisdiction of U.S. CFTC (cot) ... or the TOTAL Fx market?

I'm not trying to be hard ... I'm just trying to understand. If only 10% of the total Fx market is being report under COT ... then you can see the potential of getting a false signal if a large portion of the remaining 90% is on the opposite side.

I'll do some reading ... but there does appear to be a correlation in the COT data as it is (and you seem pretty confident)
  • #26
  • Edited 4:49pm Aug 24, 2007 4:31pm | Edited 4:49pm
An update on the COT report today

========this is what I would do if I were you, I'm not giving trading advises ========
If I'm still in the UJ long trade I will want to hold on to it, or even add positions if I feel comfortable. This friday's COT report reinforces the weakness of the Yen. The commercials are now net short on Yen (last week they were still net long), in an extreme level that hasn't been seen since June 06. The June 06 trade, if you got in a year ago could've yielded a couple thousand pips. So even if I'm not long UJ, it is not a bad idea to start doing it now. Though we might see some drawdown before it takes off. For those who got in on monday, congrats, this trade should have given you a couple hundred pips by now, and more to come.

BTW let me clarify that I am not in this trade, I'm long on AUD/JPY because it's lower margin requirement gives me a higher R.O.I.
============================================

OK enough of the COT, let's take a look at the weekly chart. UJ has an inside daily bar and a bulling weekly bar. We could trade the breakout. On AUD/JPY weekly, which is the trade I'm in now, we have a weekly bullish bar. If you don't know how to trade this, read the James16 chart thread please. And read the whole thread, I know it's long but it's worth the 1000 pips you're gonna be making.
Take a report.
  • #27
  • Aug 24, 2007 4:37pm Aug 24, 2007 4:37pm
Quoting Rustbelt
"anyway, COTs are designed to represent 70%(or 80%, I don't remember the exact figure but it should be on the CFTC website) of the market at any time. And from past experiences I would say it is pretty damn accurate. So I would care less what Upperman says"

Is this 70%-80% of the market under the jurisdiction of U.S. CFTC (cot) ... or the TOTAL Fx market?

I'm not trying to be hard ... I'm just trying to understand. If only 10% of the total Fx market is being report under COT ... then you can see the potential of getting a false signal if a large portion of the remaining 90% is on the opposite side.

I'll do some reading ... but there does appear to be a correlation in the COT data as it is (and you seem pretty confident)
No they're not. BUT, most of the well capitalized large commercials are US companies with billions lying around. Walmart, Google, Banks, etc. And COT reports only report positions in the futures market in the US, mostly traded on CBOT, which I believe to be the most traded futures market in the world with big companies all around the world. Correct me if I'm wrong.

I've been using the COT for some time now and it has been rewarding. So I'm pretty confident about my trades.
Take a report.
  • #28
  • Aug 24, 2007 4:42pm Aug 24, 2007 4:42pm
For those who don't like JPY pairs, COT has given us a long on EUR/USD as well as cable. So look out for bullish PA setups.

I hate cable though because its margin requirement but it does give you more pips. Your call.
Take a report.
  • #29
  • Aug 24, 2007 6:51pm Aug 24, 2007 6:51pm
Yes, there is a long signal for eur/usd based on the most recent CFTC COT Report - published today for their report week ending Tuesday, August 21, 2007.

I also suggest to look into the previous report published last Friday. I would call it COT 1 and the most recent one as COT 2. Both COT 1 and COT 2 changes are aggressive additions on the long side. I attach the chart explaining these changes timewise. COT 1 week is in magenta box and COT 2 week is in yellow box. Since COT 1 week was a depreciation week for the euro, commercials started to build their long positions. However, the decline continued the next week and I do not see how COT 1 commercials were able to recoup their losses unless all of them (or, as we say 80% of them) built up their positions on the last day of this report, i.e. August 14th. At their best, they are at BE point today.

By a factor of time delay COT 1 was published at the time when euro already reversed and created a huge engulfing candle. Retails (i.e. us, small traders) received a long signal both from the COT 1 and a chart. The market gave us a gift by a simple delay factor, or Cateful's Another Way to trade PA. Idea is fully seconded.

Now, let's look at COT 2 which is published today. These 16,639 new contracts were indeed a big win. Here is my concern, though. The most recent change on the long side of COT seems to be, so to say, already priced in the PA (unintended pun, folks). We do not know how many of them offloaded their positions yesterday and today. Commercials play aggressively, that is they may leave the battlefield without saying goodbye.

Another observations - don't you find these week-long boxes having the same sizes? If so, why can't we take an original approach and compare themselves with one candle formation? Does the last week as a whole represent a rising star? Maybe, but we are not at the bottom of a cycle. Maybe, I am going too far and a complicated way, however, I am using COT and PA.

I will waiting for a short signal on Monday-Tuesday, to make the story short (another pun..).

Good luck.
Attached Image (click to enlarge)
Click to Enlarge Name: euro.GIF Size: 13 KB
I am a very humble trader Up 380 pips - two trades.
  • #30
  • Aug 24, 2007 8:08pm Aug 24, 2007 8:08pm
Quoting CateFul
This is a weekly chart of JPY futures. I use a 52 week sma to determine the trend, COT index is set to 26 weeks to determine the extremes. If you analyze the chart a little bit you will see that the commercials almost always are long at market bottoms and short at market tops. Small specs do the exact opposite. And you wonder why 95% of small traders fail

So what we want to do is to follow the commercials. When commercials are extremely short, we short, too. and vice versa. Be careful this is the futures market so when you refer back to spot forex USDJPY, you will be shorting JPY, ie. longing USDJPY. This chart is from last week. Now we know that the commercials are short on JPY, we know the JPY will depreciate, so we look for a bullish PA to form on the daily USDJPY chart.

EDIT: the chart below should say commercials short, specs long. Sorry about that.

How are you setting up those COT charts? I found the link just want to make sure I am comparing apples to apples
  • #31
  • Aug 24, 2007 10:08pm Aug 24, 2007 10:08pm
Quoting Urchin
Yes, there is a long signal for eur/usd based on the most recent CFTC COT Report - published today for their report week ending Tuesday, August 21, 2007.

I also suggest to look into the previous report published last Friday. I would call it COT 1 and the most recent one as COT 2. Both COT 1 and COT 2 changes are aggressive additions on the long side. I attach the chart explaining these changes timewise. COT 1 week is in magenta box and COT 2 week is in yellow box. Since COT 1 week was a depreciation week for the euro, commercials started to build their long positions. However, the decline continued the next week and I do not see how COT 1 commercials were able to recoup their losses unless all of them (or, as we say 80% of them) built up their positions on the last day of this report, i.e. August 14th. At their best, they are at BE point today.

By a factor of time delay COT 1 was published at the time when euro already reversed and created a huge engulfing candle. Retails (i.e. us, small traders) received a long signal both from the COT 1 and a chart. The market gave us a gift by a simple delay factor, or Cateful's Another Way to trade PA. Idea is fully seconded.

Now, let's look at COT 2 which is published today. These 16,639 new contracts were indeed a big win. Here is my concern, though. The most recent change on the long side of COT seems to be, so to say, already priced in the PA (unintended pun, folks). We do not know how many of them offloaded their positions yesterday and today. Commercials play aggressively, that is they may leave the battlefield without saying goodbye.

Another observations - don't you find these week-long boxes having the same sizes? If so, why can't we take an original approach and compare themselves with one candle formation? Does the last week as a whole represent a rising star? Maybe, but we are not at the bottom of a cycle. Maybe, I am going too far and a complicated way, however, I am using COT and PA.

I will waiting for a short signal on Monday-Tuesday, to make the story short (another pun..).

Good luck.
The commercials DO NOT make money by trading, my friend. So even if they're long along the bearish trend, they do NOT lose, NOR break-even! They still profit, just not from trading. And that's why they're called the commercials.

If you're still confused, think of it this way. US based ABC Bank operates in Japan and it's giving a loan of 10 billion japanese yen, or 100 million dollars to a japanese company. In order to do that, it needs to convert some of its dollars to Japanese Yen. So they do an analysis and it looks like the Japanese Yen is going to appreciate. So what they do? Right, they buy the yen now so they're paying a cheaper price. If they buy a week later, it would cost more than 100 million dollars. So in this sense they're profiting from a lower cost of providing the loan service, which translates to better ROI.

Be careful shorting EURUSD.
Take a report.
  • #32
  • Aug 24, 2007 10:10pm Aug 24, 2007 10:10pm
Quoting Cmartin371
How are you setting up those COT charts? I found the link just want to make sure I am comparing apples to apples
It's explained in previous posts. I look at weekly charts for the past 3 years, day session, COT index=26 weeks (for most currencies), 52 SMA, only futures, no options.
Take a report.
  • #33
  • Aug 24, 2007 10:27pm Aug 24, 2007 10:27pm
Quoting CateFul
And now we know the direction of the trend is going to change, we look for a price action to form. A lot of you guys probably saw this pb off last week's close. If you got in long, stay steady because when the commercials are working the reversal generally last some time. If you're in this trade it should have generated 300+ pips.
CateFul,
Nice information you have here, I was interested in COT and knew it that it will be useful someday, and now you hit it well, please give us the upcoming trend according to COT, in the mean time, here is my view about daily and weekly USDJPY, the indicator is called CandleAggregator.
Attached Images
  • #34
  • Aug 24, 2007 10:34pm Aug 24, 2007 10:34pm
Quoting Urchin
Yes, there is a long signal for eur/usd based on the most recent CFTC COT Report - published today for their report week ending Tuesday, August 21, 2007.

Another observations - don't you find these week-long boxes having the same sizes? If so, why can't we take an original approach and compare themselves with one candle formation? Does the last week as a whole represent a rising star? Maybe, but we are not at the bottom of a cycle. Maybe, I am going too far and a complicated way, however, I am using COT and PA.
Here are other views about weekly EURUSD.

if shorting then it will be small retracement, better find ways to long again.
Attached Images
  • #35
  • Aug 24, 2007 10:41pm Aug 24, 2007 10:41pm
Quoting mason
CateFul,
Nice information you have here, I was interested in COT and knew it that it will be useful someday, and now you hit it well, please give us the upcoming trend according to COT, in the mean time, here is my view about daily and weekly USDJPY, the indicator is called CandleAggregator.
Thanks for the chart mason. However on chart I have a bullish candle on all JPY pairs. I'm not sure if the candle aggregator "aggregates" correctly. But why not just use a weekly chart?
Take a report.
  • #36
  • Aug 24, 2007 10:41pm Aug 24, 2007 10:41pm
Thank you for your great information. You said in a previous post to go with the commericals. You said that the Eur/usd gave long signal. The Friday COT report said there were 158,133 commerical short contracts. It looked like the non-commericals were long and the commericals were short. I see the chart said that commericals rose to 100. Which do you use, report or chart? I am confused. I hope you can understand my question.
Thanks in advance and for your information.
  • #37
  • Aug 24, 2007 10:48pm Aug 24, 2007 10:48pm
Quoting mason
Here are other views about weekly EURUSD.

if shorting then it will be small retracement, better find ways to long again.
You're absolutely right. If you really want to take a short, take 10 or 20 pips and run. I myself wouldn't even bother to risk it. The nice thing about the COT is, you know the market is going to go up, so it does not really matter where you got in, if your timing is wrong, don't worry, the market will come to your rescue.

Also if you trade with the trend and the support from the COT, you could literally turn $200 to $2000 in one trade, by adding positions every week with the profit you've earned from last week, as long as the market is moving your way you have nothing to worry about. With a 50:1 leverage you could've doubled your account during the first week of the AUDJPY trade I posted in previous posts.

Also with these longer term trades you do not worry about news. If you're getting hundres even thousands of pips out of one trade, you shouldn't be worried with a 50-pip news drawdown.
Take a report.
  • #38
  • Aug 24, 2007 10:53pm Aug 24, 2007 10:53pm
Thanks for the thread and links, very informative.
  • #39
  • Aug 24, 2007 10:53pm Aug 24, 2007 10:53pm
Quoting mmcoz
Thank you for your great information. You said in a previous post to go with the commericals. You said that the Eur/usd gave long signal. The Friday COT report said there were 158,133 commerical short contracts. It looked like the non-commericals were long and the commericals were short. I see the chart said that commericals rose to 100. Which do you use, report or chart? I am confused. I hope you can understand my question.
Thanks in advance and for your information.
For Euro, the commercials have been short since Dec 2005. If some day you see they're net long, big uptrend's coming.

But for now, we only look at relatively extreme positions. Even though they're still net short, their short positions were at an extreme level, ie. they're not shorting this pair as much.
Take a report.
  • #40
  • Aug 24, 2007 10:56pm Aug 24, 2007 10:56pm
does anyone know how to change the thread title? You guys seem to be more into this COT stuff than PA so I'm thinking to add COT into the title.
Take a report.
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