For forex traders, reading through the COT report might seem cumbersome. If you are interested in trading the forex market using the COT report, some economic calendars make available relevant snippets of select speculative net positions from the report. Below is a screenshot from Investing.com showing the latest release of the COT report on September 18, 2020, at 3.30 PM ET. Forex traders may use currency derivatives COT reports to find large net long or net short positions.
How to Use the COT Report
On the other hand, a divergence between the above can signal the opposite. These are typically hedge funds and various types of money managers, including registered commodity trading advisors (CTAs); registered commodity pool operators (CPOs) or unregistered funds identified by CFTC. The strategies may involve taking outright positions or arbitrage within and across markets. The traders may be engaged in managing and conducting proprietary futures trading and trading on behalf of speculative clients.
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In this case, traders can see what market participants in other markets are doing and compare it to the instrument they are trading using intermarket analysis techniques. Open interest held or controlled by a trader is referred commitment of traders forex to as that trader’s position. 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.
THE COMMITMENT OF TRADERS (COT) REPORT
Department of Agriculture’s Grain Futures Administration issued an annual report outlining hedging and speculation activities in the futures market. In the 1990s, the report moved to a bi-weekly publication before going weekly in 2000. COT reports are used by many speculative traders to help making decisions on whether to take a long or short position. One way to use the COT report in your trading is to find extreme net long or net short positions. So, when you find that their positions on a certain futures contract are reversing, and a reversal might be imminent on the underlying asset.
THE COMMITMENT OF TRADERS FINANCIAL FUTURES (TFF) REPORT
The COT also delineates the number of contracts involved in spreads. In the middle of September, net short positions hit an extreme of 45,650. Notice how the non-commercial’s long positions increased by 2100 while their shorts reduced by 20. So, it is difficult to accurately track the volumes behind all forex trades. It is also harder to know what the big banks, the large speculators, and other market drivers, are doing.
He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem. In early October 2009, EUR futures net long positions hit an extreme of 51,000 before reversing. As you can see, the currency pair just came from a downtrend and is making a reversal to the uptrend at about the same time. There are two ways to use the COT report to spot potential reversals in the forex market. Many traders and analysts use this tool and have developed custom indicators driven by COT.
However, the original COT reports are text based and the CFTC does not provide any data analytics tools. Barchart Premier Members can choose from a Detailed Report where you can page through the last 52 reported weeks of data, or a Summary Report, showing just the last reporting period. To get better results, you can use the data from the COT report to complement your technical analysis from other forex trading tools. The COT report can serve as a powerful forex volume indicator when you use it rightly.
The report contains all the positions of the main market factors in the United States. As the value of the net short positions of non-commercial traders (the green line) dropped, so did EUR/USD. If the commercial traders are going heavily bullish while the non-commercials are heavily bearish, the market could experience a reversal to the uptrend. And if commercials are going short while non-commercials are going long, a reversal to the downtrend may occur. The chart below is for Euro futures with its COT data applied; the blue line on the price chart shows prices making higher highs while large speculator positions are making lower highs.
- The chart below is for Euro futures with its COT data applied; the blue line on the price chart shows prices making higher highs while large speculator positions are making lower highs.
- There are two ways to use the COT report to spot potential reversals in the forex market.
- Each Friday, the CFTC (US Commodity Futures Trading Commission) reports the COT (Commitment of Traders) report.
- In general, the large speculator category represents fund traders and professional traders who carry large positions.
We recommend that you seek independent financial advice and ensure you fully understand the risks involved before trading. Looking at forex trading, the chart below shows GBP/USD with its COT net positions applied. The focus here is on the position levels when it reaches its all-time extreme and the price action development afterwards. The extreme levels are marked with blue circles for large speculators.
And the weight these traders pull on the markets can sometimes be staggering enough to drive trends. As retail forex traders, our best bet is to trade like big financial institutions. It is not investment advice or a solution to buy or sell instruments. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading in foreign currency contracts or other off-exchange products on margin carries a high level of risk and is not suitable for everyone. We advise you to carefully consider whether trading is appropriate for you in light of your personal circumstances.
The Commitment of Traders (COT) reports 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. Commitment of Traders (COT) charts are updated each Friday at 3pm CT. The disaggregated COT report is another one that is commonly known by traders.
This use of the COT report is similar to how you might use a sentiment indicator, such as the Current Ratio FXSSI indicator, in a forex sentiment analysis. The long report, in addition to the information in the short report, groups the data by crop year, where appropriate, and shows the concentration of positions held by the largest four and eight traders. Due to legal restraints (CEA Section 8 data and confidential business practices), the CFTC does not publish information on how individual traders are classified in the COT reports.
In this lesson, we will focus on how and where you can retrieve the COT report. The COT report is prepared and published every Friday at 3.30 PM ET by the US Commodity Futures Trading Commission. However, you can access the latest report and those from previous issues at the CFTC website. COT reports can be obtained from the CFTC website and can be downloaded in several file formats. This article is for general information purposes only, not to be considered a recommendation or financial advice.
This means that an oil company with a small hedge and a much larger speculative trade on crude will have both positions show up in the commercial category. Simply put, even the disaggregated data is too aggregated to be said to accurately represent the market. Non-commercial traders are large speculators who already have a lot of money in the bank, but want to make some more by trading the futures market.
Since CFTC releases the weekly report every Friday for all trades recorded before Tuesday, you can only use it for long-term trades. But if you need details on past data, check the historical data section of the CFTC website. And if you need to check the weekly reports in a particular month, use the Historical Viewable section of the website. Open interest is the total of all futures and/or option contracts entered into and not yet offset by a transaction. The aggregate of all long open interest is equal to the aggregate of all short open interest. 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 that will add to the bullishness of the report.
To use the COT Report as a volume indicator, keep your eyes on the open interest numbers of an asset. When there is a rise in the open interest of an asset, it means more people are trading the futures contract of the asset. It is important to remember that correlations change over time; however, since the Euro, British Pound, and Gold are all priced in USD, the correlation is expected to remain close to its averages unless a major change happens. The Legacy and Disaggregated reports are available in both a short and long format.
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