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  • #10,141
  • Feb 20, 2010 8:37am Feb 20, 2010 8:37am
Quoting strat
So, a BEOB at R and 1.27 FE on the Worker
Two Hanging Men at R on the Boss
And a small body bar at R, 20 and 38.2% on the Big Boss

PRICE is making HHs and HLs so.............................................
For my new trading week I see swissy and fiber both showing some price action reversals at pretty key locations. but i would expect the reversals to be shallow before a continuation of the prevailing trend ...
  • #10,142
  • Feb 20, 2010 12:07pm Feb 20, 2010 12:07pm
i am back with my first COT examples, and i chose 2 charts because they are very easy to understand: euro-globex for the last 6 months, and usd index for the last year.

we are not looking for price action, but for information about how big traders are positioned. so the main focus is the lower window where you can see 3 lines - blue (commercials), green (large traders) and finally red (small speculators).

* brief legend: commercials = large exporters/importers, they have to trade at whatever price; large traders = banks, hedge funds, any large financial holding that use trading for speculations - these guys make the trend!; and small speculators = retail traders.

basically, large traders make the trend, and if you want to see the long term trend you just look at the position of green and blue lines (you can also see the size of the positions held by each category, commercials vs. large traders vs. small traders).

another thing you should be aware of: there is a time lag before reporting and release of COT data - what you see on this chart happened about a week ago. but, since we are looking at the direction of the MAIN trend, and consider monthly timeframes for analysis, this delay is not really significant.

these being said, let's look at these two examples: euro-globex and usd-index. i think these are self explanatory, just take a look to the lower window and see how trend makers are positioned, and how big are their positions. large traders are selling euro, and more important, are DESPERATELY buying dollars - so plan accordingly, until you see something else on COT reports.

these charts were taken from "timingcharts".
Attached Image(s) (click to enlarge)
Click to Enlarge Name: euro-globex.png Size: 46 KB
Click to Enlarge Name: usd-x.png Size: 50 KB
Nihil Sine Deo.
  • #10,143
  • Feb 20, 2010 3:52pm Feb 20, 2010 3:52pm
Thank you.
A clear, concise, educational post.
Nothing cryptic, nothing verbose.
  • #10,144
  • Feb 20, 2010 9:19pm Feb 20, 2010 9:19pm
I applaud you my man. Very nice indeed . LOL

Quoting Scrat
i am back with my first COT examples, and i chose 2 charts because they are very easy to understand: euro-globex for the last 6 months, and usd index for the last year.

we are not looking for price action, but for information about how big traders are positioned. so the main focus is the lower window where you can see 3 lines - blue (commercials), green (large traders) and finally red (small speculators).

* brief legend: commercials = large exporters/importers, they have to trade at whatever price; large traders = banks, hedge funds, any large...
Annoying Precision
  • #10,145
  • Feb 21, 2010 2:18am Feb 21, 2010 2:18am
  •  Sid
  • | Joined May 2009 | Status: Get wise or die laughing | 85 Posts
Quoting elitejets
Ha .. I don't even trade my crystal ball (I'm flat USDJPY) so you shouldn't.

The fundamentals are changing though.
When there is bad news or "risk off" trading the dollar has rallied as a safe haven, along with the yen. The yen more than the dollar so USDJPY goes down.
When there is good news in the USA then the dollar has rallied because the US is seen as recovering more quickly than other regions and more likely to hike rates....
exactly! the only thing to add to this is the boj statement of intent in terms of having a weaker yen vs the dollar at around 95.
  • #10,146
  • Feb 21, 2010 3:19am Feb 21, 2010 3:19am
  •  Sid
  • | Joined May 2009 | Status: Get wise or die laughing | 85 Posts
Quoting Scrat
i am back with my first COT examples, and i chose 2 charts because they are very easy to understand: euro-globex for the last 6 months, and usd index for the last year.

we are not looking for price action, but for information about how big traders are positioned. so the main focus is the lower window where you can see 3 lines - blue (commercials), green (large traders) and finally red (small speculators).

* brief legend: commercials = large exporters/importers, they have to trade at whatever price; large traders = banks, hedge funds, any...
hey scrat!

this is interesting stuff! thank you for taking the time and sharing this. if it's okay i've got a few questions.

the main message that i am hearing put in very simple terms is "follow the green line", as an indication for the direction of the main trend. are there any particular patterns you have observed? i.e. divergences or PA in combination with the a particular development of the green line?

and have you observed relationships between the different movements of commercials, large traders and small speculators and how these relations might indicate a particular price development.

hope this is making sense...

cheers
sid
  • #10,147
  • Feb 21, 2010 5:04am Feb 21, 2010 5:04am
Whilst it maybe correct to assume that the large traders drive the market
look at Corn and Bean futures for March and May.

The commercials lost over 1 Billion $ in 2009 in Corn alone but they have changed their tactics. (as this almost brankupted them). This year they stand to make around $2b on the March futures in Corn alone, why because they changed their approach and it is paying off big time. The could make a further $1b + in May as well if the maket remains down from the highs.

I am not saying that the charts provided are not useful, they are!
  • #10,148
  • Edited 2:49pm Feb 21, 2010 5:55am | Edited 2:49pm
Quoting Sid
hey scrat!

this is interesting stuff! thank you for taking the time and sharing this. if it's okay i've got a few questions.

the main message that i am hearing put in very simple terms is "follow the green line", as an indication for the direction of the main trend. are there any particular patterns you have observed? i.e. divergences or PA in combination with the a particular development of the green line?

and have you observed relationships between the different movements of commercials, large traders and small speculators and how...
But...If you look at the 'peaks' in the COT charts and then juxtapose those with that of your MT4 charts you'll be able to see the positioning of the major players and when the trade becomes too one-sided. This is when the big moves often occur. The COT is a useful guide but the problem is confirmation bias - one often seeks confirmation for ones current beliefs on where the market will go. I often found that I used the COT charts for that purpose. I just see them as a 'guide' but not strictly tradeable info.

Just my 2 pennies worth...

Hope you are all trading well?
Grim
Trade less and become more profitable!
  • #10,149
  • Feb 21, 2010 9:20am Feb 21, 2010 9:20am
Hi All

I'm am only @ pg 140 of this thread and have a long way to go, I continue to look at the charts, whilst reading.

Looking at the $/CAD.
Lets assume i have taken into account MM, SL's Etc.
At Line A would one have sold?
I would have, due to the BEOB and price was through support/resistance.
Whilst still educating myself, I did not take the trade so my next question.
Would you add to your position or open a new trade at this point.
The greedy part of me says yes, I say yes, we are below support, below the 20 & 50 Ma's and it's a 1 to 1 RRR.
whilst reviewing my post on closer inspection I see the highs of 13/14 Jan (resistance) acting as support @ 1.0391 so my entry would be a little lower than that.

Am I on track?

any constructive comments appreciated and thanks to all who contribute and make this such a great thread.

thanks
Frank
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  • #10,150
  • Feb 21, 2010 11:54am Feb 21, 2010 11:54am
patterns? if you call distribution/accumulation a pattern, then yes.

when the turn is approaching, you will see a gradual reduction in the positions while price is either consolidating or continuing initial direction - take a look at usd-index for the last two years and you will find a similar episode to what is happening now (you need to go by yourself to timingcharts) - observe what happened with green and blue lines after the previous buying spree (i don't usually pay attention to red lines, btw).

you need to keep in mind that trends cannot change overnight. big guys can't dump all their contracts suddenly... it takes time, and they must do it gradually. since COT reports are weekly, i would think it could take at least a month to engineer a trend change - but only if they are in a real hurry!

hope this helps. look for more examples...

Quoting Sid
hey scrat!

this is interesting stuff! thank you for taking the time and sharing this. if it's okay i've got a few questions.

the main message that i am hearing put in very simple terms is "follow the green line", as an indication for the direction of the main trend. are there any particular patterns you have observed? i.e. divergences or PA in combination with the a particular development of the green line?

and have you observed relationships between the different movements of commercials, large traders and small speculators and how these...
Nihil Sine Deo.
  • #10,151
  • Feb 21, 2010 4:22pm Feb 21, 2010 4:22pm
[quote=Grimweasel;3484131] The COT is a useful guide but the problem is confirmation bias - one often seeks confirmation for ones current beliefs on where the market will go. I often found that I used the COT charts for that purpose. I just see them as a 'guide' but not strictly tradeable info.



Grimweasel, i think that is a very good observation.
I certainly have been guilty of using COT for confirmation bias in the past.
I think it's a valuable tool, but now it's one that's rattling around at the back of my mind, if that makes any sense.
I agree totally. it's not tradeable info, just a heads up.
  • #10,152
  • Feb 21, 2010 4:27pm Feb 21, 2010 4:27pm
  •  Sid
  • | Joined May 2009 | Status: Get wise or die laughing | 85 Posts
Quoting Grimweasel
But...If you look at the 'peaks' in the COT charts and then juxtapose those with that of your MT4 charts you'll be able to see the positioning of the major players and when the trade becomes too one-sided. This is when the big moves often occur. The COT is a useful guide but the problem is confirmation bias - one often seeks confirmation for ones current beliefs on where the market will go. I often found that I used the COT charts for that purpose. I just see them as a 'guide' but not strictly tradeable info.

Just my 2 pennies worth...

Hope...
thanks, trading has been going ok lately

yes, confirmation bias that ol' chestnut. i can see how the cot can be useful to get a feeling for the larger forces that are at work behind price. i agree with your statement to use it as a guide only.

(btw good to see you're available for our meetup. i am still waiting to hear back from a few folks and then we can make a final call. so far it seems to be 2nd friday of march...)
  • #10,153
  • Feb 21, 2010 7:32pm Feb 21, 2010 7:32pm
Quoting Scrat
i am back with my first COT examples, and i chose 2 charts because they are very easy to understand: euro-globex for the last 6 months, and usd index for the last year.

we are not looking for price action, but for information about how big traders are positioned. so the main focus is the lower window where you can see 3 lines - blue (commercials), green (large traders) and finally red (small speculators).

* brief legend: commercials = large exporters/importers, they have to trade at whatever price; large traders = banks, hedge funds, any large...
Thanks Scrat! Very interesting.

Looking at your dollar index chart it looks like the large traders have backed off from the extreme high a bit and the commercials are correspondingly a little less short. If I scroll back through the chart this seems to indicate a pullback in dollar strength.
No sign of any change in sentiment in the euro though.
Let's see how my theory plays out this week, I am often wrong.
  • #10,154
  • Feb 21, 2010 9:34pm Feb 21, 2010 9:34pm
Quoting Grimweasel
But...If you look at the 'peaks' in the COT charts and then juxtapose those with that of your MT4 charts you'll be able to see the positioning of the major players and when the trade becomes too one-sided. This is when the big moves often occur. The COT is a useful guide but the problem is confirmation bias - one often seeks confirmation for ones current beliefs on where the market will go. I often found that I used the COT charts for that purpose. I just see them as a 'guide' but not strictly tradeable info.

Just my 2 pennies worth...

Hope you...
Good to hear from you again.

I seem to recall Strat saying in the past that he has not found much use for the COT.
  • #10,155
  • Feb 22, 2010 2:28am Feb 22, 2010 2:28am
Hi Strat
My charts often look different to yours but I can't see any of the points you are making. Could you post yours. Thanks
  • #10,156
  • Feb 22, 2010 2:51am Feb 22, 2010 2:51am
  •  Sid
  • | Joined May 2009 | Status: Get wise or die laughing | 85 Posts
Quoting Scrat
patterns? if you call distribution/accumulation a pattern, then yes.

when the turn is approaching, you will see a gradual reduction in the positions while price is either consolidating or continuing initial direction - take a look at usd-index for the last two years and you will find a similar episode to what is happening now (you need to go by yourself to timingcharts) - observe what happened with green and blue lines after the previous buying spree (i don't usually pay attention to red lines, btw).

you need to keep in mind that trends cannot...
cool, thanks for the explanations scrat. i have had a look at usd-index and will observe it and other currencies a bit more to get a feel for it and see if i can use it to improve my trading.
  • #10,157
  • Feb 22, 2010 3:10am Feb 22, 2010 3:10am
I get this warm little feeling inside me when I look at major chaos on a chart
and not sweat a bead.
Annoying Precision
  • #10,158
  • Feb 22, 2010 6:23am Feb 22, 2010 6:23am
Quoting PistolDave
Good to hear from you again.

I seem to recall Strat saying in the past that he has not found much use for the COT.
Hi PistolDave!
Thanks old chap. I'm undergoing some new education so my postings will be somewhat limited for the next 2 years. I still pop in and check the thread at the weekends and the odd comment should I see fit!
Hope all goes well; back to lurking and study!
Trade less and become more profitable!
  • #10,159
  • Feb 22, 2010 9:04am Feb 22, 2010 9:04am
you are welcome.

for me, COT reports are useful for confirming if i am on the right track. i am not using PA from those charts, but only look at the positions size and correlate this with volumes and patterns of accumulation/distribution (but that's another story and won't talk about it here). this, for me, is very valuable information, as it can help me identify a top/bottom in the major trend.

anyway... PA, or COT or whatever other information/technique we use, in the end, it must bring us to this: buy as long as they buy, sell as long as they sell.

Quoting Sid
cool, thanks for the explanations scrat. i have had a look at usd-index and will observe it and other currencies a bit more to get a feel for it and see if i can use it to improve my trading.
Nihil Sine Deo.
  • #10,160
  • Feb 22, 2010 10:10am Feb 22, 2010 10:10am
Quoting elitejets
No challenges for GBPCAD tonight Strat?
No challenges for GBPCAD tonight Strat?

It dawned on me this week end of other things I do and take for granted that others “may” benefit from.

When Nicola asked this question it was presumably in preparation for a long above the hammer marked “A” off support on Feb 16.

My reply was “I need to see more, much more”.

This reply was for the “teaching” side of me on the thread.

For my personal trading, a “long” was the last thing on my mind.

I am loaded with shorts and the FIRST thing I am concerned with is protecting profits.

The SECOND thing is looking for reverse PASR to close these positions

The THIRD thing is SL placement to protect profits while still allowing PRICE to make its natural moves.

I never even thought or considered long positions at this point.

Do not try and work out why I entered certain trades – I am just a few steps beyond trading basic PASR.

The point of this is:

BEFORE you can enter a trade in the opposite direction, PRICE has to STOP going in its original direction. This is BEFORE PRICE moves in the opposite direction. It has to STOP going in its original direction.

PRICE cannot go in the opposite direction UNTIL it has STOPPED going in its original direction. When we see that PRICE has STOPPED, we look for signs that PRICE is going in the opposite direction.

Many times, (but not always), PRICE will go into consolidation after a big move, especially a big move down. PRICE will STOP going down but may not start going up again. We need to “SEE” and must always look for those signs to tell us that PRICE is now moving in the opposite direction.

It happens, but it is not common, for PRICE to turn around on the next bar and go in the opposite direction. The train has to go on the turntable.

How to apply this to your trading:
When I am initiating new positions on a pair, I always “think” I am in a trade in the opposite direction. I then “think” FIRST, where would I protect profits – what PRICE level. I remember this level.

I then “think” where is reverse PASR to get me out of these positions. When this happens, I remember that.

I then “think” where would my SL be to protect my profits yet still let PRICE move. I remember that.

I do not consider new positions until I have answers for all this. When all this happens, then I know I can think of positions in the opposite direction.

This has prevented me many times from entering positions prematurely and losing 100/200 pips or so.
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