Trading COT Report

There was a period of about 2 or 3 months where I believed COT reports had some secret information that could be interpretted to trading profitably.

God, I wanted it to be true.

But here's the catch.... the COTs are not required to exercise their contracts for 3 months out (or more) so there is no way to pinpoint who is exiting and entering when.

In other words, the information from raw COT reports is lacking enough information to gain any real intelligence.

Plus, these COTs are really just hedges in most cases.... not speculations. The companies are not looking to make profit, but just break even if the exchange rate goes against them.

So as far as I can tell, you are trading in the dark with them

thank you for the reply.

I've studied Williams in detail. He describes most of the methodology he used to win the championship in his book Long term secrets.

I dont think it is because of the COT report. The main reason for his win was a volatility breakout system and the main reason for his drawdown was the Kelly mm. He used a volatility breakout system with 3 filtetrs. He used gold and bonds and day of the week as filters. In his book he says what made him win the championship was the kelly criterion mm. When he was trading it Ralph Vince was his programmer and Vince discovered a flaw in the kelly criterion due to which he says it cant be applied to trading. Williams got the idea of applying Kelly to trading because it had been used successfully by blackjack players. But the problem was in blackjack the size of your profit or loss is constant but its not so in trading it varies and you never know how much your profit it will be. This is the reason why Williams says Kelly cant be applied to Trading. Anyway he didnt know it at the time even though Vince warned him he continued to trade Kelly and won the championship. He then began applying Kelly to his managed accounts but a while later sure enough all his managed accounts started having humongous drawdowns and he finally saw Vince was right. He gave up Kelly and now trades his own mm algorithm.

Personally I think to win in this game we have to have a definable realistic advatage. Patterns, indicators, arcane theories aren't really a definitive advantage. If they work its probablly due to a luck especially in fx and we all know very very few people are lucky in the long run. I mean patterns & indicators have no consistent reliability what so ever. Just take a look at the trading system section hundreds of threads. with thousands and thousands of posts. All of them have met the same sorry end. Someone hits upon an idea which he found has worked for a few weeks or so and he publishes his results and the nextr thing you know you have pages and pages of posts proving and attempting to improve his menthod when in reality all it was was short term luck. I can give u so many examples remember Imran Saits theread or say Oxfx thread (34 winners in a row) where are they today.

The answer is nowhere.

This is what has led me to believe to win long term we have to find something real like a real relationship perhaps an intermarket one we all know markets are interrelated or say a study of volume VSA/order book or whatever. something clearly definable ..... can u follow what I'm trying to say.

This is why I think COT may just give us that real advantage. The reason is simple we all know the public lose most of the time. Well if they lose who wins? Its either the commercials or the large speculators. By studying the COT we get an inside look into who is doing what. Blindly following commercials will get you nowhere because a lot of them just hedge their position. Lots of the COT threads here say be on the commercial side or another one says in the net positions if the large specs are above the commercials you should only take long positions and vice versa.

Unfortunately I dont think its that simple. I'm currently studying COT in detail and I think the key is to also consider OI its vital to know who are increasing and reducing positions and more importantly why.

I therfore think the COT can give us an advantage to a larger extent than patterns indicators PA.

This, intermarket analysis and volume (thats why I'm looking into VSA) are the only things which can give us a true advantage something clearly definable something real.

You seem very touchy off late so I'd lime to clearly state this is only my opinion and I maybe wrong. I enjoy reading your posts and I hope I HAVE NOT OFFENDED YOUR SENTIMENTS

Offended? Hardly... I thought it was an excellent post.

"Personally I think to win in this game we have to have a definable realistic advatage. Patterns, indicators, arcane theories aren't really a definitive advantage. If they work its probablly due to a luck especially in fx and we all know very very few people are lucky in the long run. I mean patterns & indicators have no consistent reliability what so ever. Just take a look at the trading system section hundreds of threads. with thousands and thousands of posts. All of them have met the same sorry end. Someone hits upon an idea which he found has worked for a few weeks or so and he publishes his results and the nextr thing you know you have pages and pages of posts proving and attempting to improve his menthod when in reality all it was was short term luck. I can give u so many examples remember Imran Saits theread or say Oxfx thread (34 winners in a row) where are they today.

The answer is nowhere.

This is what has led me to believe to win long term we have to find something real like a real relationship perhaps an intermarket one we all know markets are interrelated or say a study of volume VSA/order book or whatever. something clearly definable ..... can u follow what I'm trying to say."


We know price goes up and down. And we know how much it goes up and down on average. I think the long term view is correct.

Yes, Yes, Yes. Finally someone is using their head and realizing the difference between luck and skill. If your strategy has a reason for working than you have an edge, but if it's just performed well statistically there is no reason why that performance should continue. As for me, like the person who wrote the quote, believe that the market prices in outcomes but there are discrepencies everywhere, especially between markets/participants. My reason for entering trades is when I find a discrepency between what oil, currencies, and central banks are doing. If your system is technical, that's fine- just make sure it's based somehow on how the markets work, the participants think, and if possible, consider different outcomes.

All the best, and trade professionally,

Kris Matthews

may I ask you what correlation indicator are you using below in the histograms?

I use a variation of the COT Report called the COT Proxy popularised by the futures trader larry williams. it tries to emulate the COT report when there is an absence of such reports ie. there is no COT report for Yuan, Singapore Dollar, other currencies so we use the proxy as an emulator.

The COT Proxy sometimes gives earlier signals too.

You can take a look here for the COT charts on stocks. There are for forex too http://uncleti88.blogspot.com/

Oi drop and commercials longs so accordingly to L W Oi is the commercials interest about the market to go up or down.
But sometimes the market starts to go down and comercials are net log what does it means ? Euro down and commercials are net longs ?
Hedging ? But we are well above 2010 commercials longs was 10.000.