It is not a solicitation or a recommendation to trade derivatives contracts or securities and should not be construed or interpreted as financial advice. Any examples given are provided for illustrative purposes only and no representation is being made that any person will, or is likely to, achieve profits or losses similar to those examples. DailyFX Limited is not responsible for any trading decisions taken by persons not intended to view this material. Another excellent tool, is the Commitment of Traders Analysis from DailyFX.
Therefore, you should only use it to get an overview of the state of the market. Commodity fund managers, for the most part, plus a few of the big banks and brokers. You might think you want to follow the money managers, but remember, trend followers generally miss the turning points. The important thing you are looking for is when the position of either commercials or speculators gets proportionately large, compared to recent data, at which point the professionals think it is “extended” or overdone. This is often, if not always, a reliable guide to a pending turning point. If a major currency has a net long or short of 100,000 contracts, that would generally be viewed as being extended.
Supplemental Report
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc. In COT, hedgers, who are also known as the commercial traders’ intention is to shield themselves against a sudden unexpected price movement on an asset (including those caused by exceptional events). In trading, sentiments offered by other investors and traders are very important in determining the market moves. This is simply because any person trading the market has his own opinion on the future price of the shares, currencies, or commodities. It can be a real nuisance to try to incorporate the COT report into your trading plan, because the report itself, is badly designed and not user-friendly.
- OANDA Corporation is not party to any transactions in digital assets and does not custody digital assets on your behalf.
- For instance, assuming that 80% of the market participants believe in going long EURUSD, and then something significant such as an interest rate decision is announced, then the minority will have their say.
- Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only.
The Commodity Futures Trading Commission (Commission or CFTC) publishes the Commitments of Traders (COT) reports to help the public understand market dynamics. Specifically, the COT reports provide a breakdown of each Tuesday’s open interest for futures and options on futures markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC. The CFTC releases the weekly COT reports in static format to support the historical usage patterns of industry professionals viewing and accessing each week’s data.
With these general definitions in mind, traders can then decide how to use this information. The image below depicts an extract from the COT report with the three main groups as outlined above. Introducing the Trading Journal Spreadsheet, the ultimate tool for traders of all levels. Many traders and analysts use this tool and have developed custom indicators driven by COT.
Futures
This means that if prices are rising, commercial traders are expected to be selling, and if prices are declining, commercial traders are expected to be buying. This chart shows the weekly Commitment of Traders report published by the CFTC. The COT report is considered to be an indicator that analyzes market sentiment. On this chart, you can see the net «non-commercial» (speculative) positions taken on by forex traders in the U.S. futures markets. Data in the COT report influences – and is influenced by – the spot foreign exchange market.
We can see that historical extreme positioning levels represented historical price turning points. The argument here is that delayed data is also considered to be discounted by current market prices and therefore not useful. As a result, a classic bullish set-up for a given market would be when large traders are net long and small traders are net short. The market will be in a weakened bullish set-up “if” the two-week trend in the large trader position is down, or in other words, if the funds are in the process of liquidating their net long position. The larger the net short position of the small trader (relative to history) and the extent that small traders are holding a position “against” the trend are factors which will add to the bullishness of the report.
Commitment of Traders (COT) Reports
Perhaps players were heavily long euros instead and now are squaring up. Because flow data can be deceptive and because many players do not have access to these flows, traders look for any gauge that offers insight into which way the market is leaning. Because of this, they like to look at the positioning data by CFTC as well as reports released by the Tokyo Financial Exchange. From the report located above, the number of funds off-loading the JPY shorts increased dramatically from the week prior. When this type of shift from major funds is observed, traders can look for other signs that show the prior trend is losing steam which could indicate a possible exit of open positions.
Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master’s in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses.
These individuals and companies mostly participate in the futures markets because they have huge sums of money. For this reason, in checking the Commitment of Traders, the decisions that they make are critical and have a huge chance of moving the market. On the other hand, large speculators or non-commercial institutions are never interested in holding an asset. Their goal is to enter a market, make a good profit and exit immediately. They are different from hedgers who want to hold an asset for a few months or years. The goal of the large speculators is to identify a trend and then bet that the trend will go on and then enter the position.
Current Legacy Reports:
The aggregate of all long open interest is equal to the aggregate of all short open interest. Open interest is the total of all futures and/or option contracts entered into and not yet offset by a transaction, by delivery, by exercise, etc. None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Any opinions made are subject to change and may be personal to the author.
TRADING JOURNAL SPREADSHEET – 100% MY WORK – VIEW MORE
For the COT Futures-and-Options-Combined report, option open interest and traders’ option positions are computed on a futures-equivalent basis using delta factors supplied by the exchanges. Long-call and short-put open interest are converted to long futures-equivalent open interest. commitment of traders forex Likewise, short-call and long-put open interest are converted to short futures-equivalent open interest. For example, a trader holding a long put position of 500 contracts with a delta factor of 0.50 is considered to be holding a short futures-equivalent position of 250 contracts.
You’d have to go all the way back to 2002 to find data points representing the EUR/USD conversion rate that start with a zero to the left of the decimal point. The market reaction was severe to most investors who had traded the Swiss dominated currencies. Therefore, the key to success when using the COT model is to understand when the extremes have been reached and then make the entry or exit decision. Therefore, as a trader, you can use this information to determine whether to buy or sell an asset. Today we are going to analyze in detail the CoT Report (Commitment of Traders), one of the most important reports of the CFTC, and how it can help us in trading.
