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Apr 3
5.4 How To Use Cot Data

 

In forex trading commodities stocks trading, the Commitments of Traders (COT) report is the only source of vision into the forex trading market locations of the main players. The COT report gives a breakdown of each Tuesday’s open interest for forex trading markets in which 20 or more traders hold ranks equal to or greater than the reporting levels recognized by the forex trading CFTC. The CFTC classifies traders into three groups: commercial traders, non-commercial traders (large speculators), and small traders (small speculators). All of a trader’s reported stocks locations in a commodity are categorized as commercial if the trader uses those contracts for hedging.
COMMERCIALS :
Traders get categorized as forex trading commercial by filing a declaration with the CFTC that they are forex trading commercially “engaged in business activities hedged by the use of the forex trading stocks or option markets.”
Forex trading Commercial hedgers are institutions and individuals who function in the cash forex trading market of the fundamental commodity. Examples consists of farmers, international businesses, miners, and professionals. When prices are up, the forex trading commercials hedge their stocks sales by selling stocks to minimize risk. If prices go down, they will be protected by their forex trading stocks locations.
Forex trading Commercials are considered to be the most influential group in the commodities forex trading markets, because they have analysts and sources of intelligence that analyze a number of forex trading variables. Although you will never know what information they have at their disposal, by examining the COT data, you can see what locations they take. This is the key point in all of this.
These “Big Dogs” are worth paying attention to - especially at extreme locations, since their buying or selling strength can move the markets. They’re like a herd of elephants stomping along a muddy river bank. You can’t miss their foot prints for sure.
FOREX TRADING NON-COMMERCIALS (OR LARGE SPECULATORS) :
The forex trading non-commercials, or “large speculators,” take on risk in return for the opportunity to forex trading profit. They are speculative traders, who are generally categorized as forex trading fund managers. These are forex trading trend followers, and as such are not terribly accurate most of the time - but not all the time.
FOREX TRADING SMALL SPECULATORS :
This category includes all forex trading speculators with places below reportable limits, as specified by the CFTC, and small hedgers.
FOREX TRADING SPREADING :
Forex trading non-commercial locations also include spreading. Commercial traders are not perceived as spread traders, since they are hedging against an actual commodity. Forex trading small traders may have a spread as a position, but their individual places are not reported since spreading in this group is relatively small.
FOREX TRADING IN COT: THE BIG DEAL :
When analyzing historical stock prices, we are limited to five forex trading variables ? i.e., the opening price, high, low, closing price, and volume in a time series (hourly, daily, weekly, etc.) The same holds true for forex trading stocks, with the exception that there is also the element of open interest, which is the total of all forex trading stocks and/or open contracts entered into - not yet offset by a delivery, exercise, or transaction. The aggregate forex trading of all long open interest is equal to the aggregate of all short open interest. Open interest held or controlled by a trader is referred to as that trader’s position.
As traders apply the various indicators available to them, like Bollinger Bands, RSI, Stochastic, etc., they are simply manipulating the same underlying forex trading data in an effort to make trading decisions. While the number of these manipulations is unlimited, the dataset itself is finite, never really being able to reveal any new, or more meaningful information. For forex trading stocks trading, on the other hand, the COT reports provide additional and independent datasets of forex trading for analysis.
The COT information is independent of forex trading price data, as COT data is not derived from forex trading price data. As such, the COT metrics take on a whole new level of importance.
The COT reports contain a myriad of raw numbers, far too many for the average person to comprehend. It is just a maze of forex trading data, which in and of itself is terribly difficult to read and understand.
To simplify the process of understanding what all the numbers really mean, we have created a section on this website called Weekly COT Data.
Here you see forex trading commercial, non-commercial, and non-reportable locations nicely portrayed in graphical form. All the arithmetic is done for you. In other words, each respective line above is net of long and short locations for ease of reference. If all locations were summed together, you would have a straight line, since they would neutralize each other in total.
Spreads are not included in the COT graph since they are neutral (one spread = one long and one short contract). The total long standings will equal the total short standings for all three groups.
FOREX TRADING RULES :
There are no hard and fast rules when it comes to forex trading interpreting the effect any one group has on the forex trading stocks markets. However, it is generally accepted that the forex trading commercials, or the “Big Dogs,” deserve the most respect. They are assumed to be the most successful, albeit there are times when the large forex trading speculators will indicate the strength of their commitment as greater than the other two groups. The small traders are often seen as the “dumb money” , the group to stay away from - the example of what not to do in forex trading stocks trading.
THE FOREX TRADING BIG CLUE :
In the forex trading graph, you will notice that the comm. index and the spec index are at odds with each other. What this is telling you is that, with such extreme divergence of opinion or “sentiment”, the underlying tradable is about to experience a reversal of forex trading price direction - i.e., up. That is because the forex trading commercials are heavily long, and at a 100 reading, versus the 0 reading for the opposing side. This is the forex trading extremity you should always be looking for before taking your own position in the forex trading market.
The only exception to this “rule” is where you see “backwardation ”, or “premium”. This means that the front month is priced higher in forex trading than the back month, and what this means is that the forex trading commercials really want the underlying product. I saw this happen recently with US dollar index.
Word of warning ? never short a currency where the “Big Dogs” are extremely short, but there is a premium on the front month. The ?Big Dogs? are having their cake and eating it too. Don’t you get eaten alive in the process? When the premium starts to fade and disappears, and the ?Big Dogs? are still heavily short, then you can safely short the currency.
The most important aspect forex trading of the COT. Report for most traders is the change in net standings of the forex trading commercial hedgers. Why? Because studies show that forex trading commercials hold a superior record to other trading groups in forecasting significant forex trading market moves. The large commercials are generally believed to have the best fundamental supply and demand information on their forex trading markets, and thus position their trades accordingly.
Along with the advantage of having the best fundamental supply and demand information on their forex trading markets, large forex trading commercials also trade large size, which in itself moves forex trading markets in their favor. It’s important here to note that whether a particular trader group is net long or net short is not important to analyzing the forex trading COT. report. For example, forex trading commercials in silver are the producers and they have never been net long, because they hedge their sales. In gold, however, the forex trading commercial mix is more heavily weighted toward fabricators who buy long contracts as a hedge against forex trading future inventory needs. So, again you need to look at the net change in locations from the previous report or several of the recent reports.
Individual traders that consider positioning themselves on the same side of the forex trading market as large forex trading commercials, when the large commercials become one-sided in their forex trading market view, is the best way to utilize the COT report.
Some traders do like to take the opposite sides of the trades on which the small trader in the forex trading C.O.T. reports are shown taking. This is because most small speculative traders of forex trading stocks markets are usually under-capitalized and/or on the wrong side of the forex trading market.
Also, some traders will also follow the coat-tails of the large speculators, thinking the large specs must be good traders or they would not be in the large trader category.
In forex trading commodities stocks trading, the Commitments of Traders (COT) report is the only source of vision into the forex trading market locations of the key players. The COT report gives a breakdown of each Tuesday’s open interest for forex trading markets in which 20 or more traders hold standings equal to or above the reporting levels recognized by the CFTC. The CFTC classifies traders into three groups: commercial traders, non-commercial traders (large speculators), and small traders (small speculators). All of a trader’s reported forex trading stocks standings in a commodity are categorized as forex trading commercial if the trader uses those contracts for hedging.

In forex trading commodities stocks trading, the Commitments of Traders (COT) report is the only source of vision into the forex trading market locations of the main players. The COT report gives a breakdown of each Tuesday’s open interest for forex trading markets in which 20 or more traders hold ranks equal to or greater than the reporting levels recognized by the forex trading CFTC. The CFTC classifies traders into three groups: commercial traders, non-commercial traders (large speculators), and small traders (small speculators). All of a trader’s reported stocks locations in a commodity are categorized as commercial if the trader uses those contracts for hedging.

 

COMMERCIALS :

Traders get categorized as forex trading commercial by filing a declaration with the CFTC that they are forex trading commercially “engaged in business activities hedged by the use of the forex trading stocks or option markets.”

Forex trading Commercial hedgers are institutions and individuals who function in the cash forex trading market of the fundamental commodity. Examples consists of farmers, international businesses, miners, and professionals. When prices are up, the forex trading commercials hedge their stocks sales by selling stocks to minimize risk. If prices go down, they will be protected by their forex trading stocks locations.

Forex trading Commercials are considered to be the most influential group in the commodities forex trading markets, because they have analysts and sources of intelligence that analyze a number of forex trading variables. Although you will never know what information they have at their disposal, by examining the COT data, you can see what locations they take. This is the key point in all of this.

These “Big Dogs” are worth paying attention to - especially at extreme locations, since their buying or selling strength can move the markets. They’re like a herd of elephants stomping along a muddy river bank. You can’t miss their foot prints for sure.

 

FOREX TRADING NON-COMMERCIALS (OR LARGE SPECULATORS) :

The forex trading non-commercials, or “large speculators,” take on risk in return for the opportunity to forex trading profit. They are speculative traders, who are generally categorized as forex trading fund managers. These are forex trading trend followers, and as such are not terribly accurate most of the time - but not all the time.

 

FOREX TRADING SMALL SPECULATORS :

This category includes all forex trading speculators with places below reportable limits, as specified by the CFTC, and small hedgers.

 

FOREX TRADING SPREADING :

Forex trading non-commercial locations also include spreading. Commercial traders are not perceived as spread traders, since they are hedging against an actual commodity. Forex trading small traders may have a spread as a position, but their individual places are not reported since spreading in this group is relatively small.

 

FOREX TRADING IN COT: THE BIG DEAL :

When analyzing historical stock prices, we are limited to five forex trading variables ? i.e., the opening price, high, low, closing price, and volume in a time series (hourly, daily, weekly, etc.) The same holds true for forex trading stocks, with the exception that there is also the element of open interest, which is the total of all forex trading stocks and/or open contracts entered into - not yet offset by a delivery, exercise, or transaction. The aggregate forex trading of all long open interest is equal to the aggregate of all short open interest. Open interest held or controlled by a trader is referred to as that trader’s position.

As traders apply the various indicators available to them, like Bollinger Bands, RSI, Stochastic, etc., they are simply manipulating the same underlying forex trading data in an effort to make trading decisions. While the number of these manipulations is unlimited, the dataset itself is finite, never really being able to reveal any new, or more meaningful information. For forex trading stocks trading, on the other hand, the COT reports provide additional and independent datasets of forex trading for analysis.

The COT information is independent of forex trading price data, as COT data is not derived from forex trading price data. As such, the COT metrics take on a whole new level of importance.

The COT reports contain a myriad of raw numbers, far too many for the average person to comprehend. It is just a maze of forex trading data, which in and of itself is terribly difficult to read and understand.

To simplify the process of understanding what all the numbers really mean, we have created a section on this website called Weekly COT Data.

Here you see forex trading commercial, non-commercial, and non-reportable locations nicely portrayed in graphical form. All the arithmetic is done for you. In other words, each respective line above is net of long and short locations for ease of reference. If all locations were summed together, you would have a straight line, since they would neutralize each other in total.

Spreads are not included in the COT graph since they are neutral (one spread = one long and one short contract). The total long standings will equal the total short standings for all three groups.

 

FOREX TRADING RULES :

There are no hard and fast rules when it comes to forex trading interpreting the effect any one group has on the forex trading stocks markets. However, it is generally accepted that the forex trading commercials, or the “Big Dogs,” deserve the most respect. They are assumed to be the most successful, albeit there are times when the large forex trading speculators will indicate the strength of their commitment as greater than the other two groups. The small traders are often seen as the “dumb money” , the group to stay away from - the example of what not to do in forex trading stocks trading.

 

THE FOREX TRADING BIG CLUE :

In the forex trading graph, you will notice that the comm. index and the spec index are at odds with each other. What this is telling you is that, with such extreme divergence of opinion or “sentiment”, the underlying tradable is about to experience a reversal of forex trading price direction - i.e., up. That is because the forex trading commercials are heavily long, and at a 100 reading, versus the 0 reading for the opposing side. This is the forex trading extremity you should always be looking for before taking your own position in the forex trading market.

The only exception to this “rule” is where you see “backwardation ”, or “premium”. This means that the front month is priced higher in forex trading than the back month, and what this means is that the forex trading commercials really want the underlying product. I saw this happen recently with US dollar index.

Word of warning ? never short a currency where the “Big Dogs” are extremely short, but there is a premium on the front month. The ?Big Dogs? are having their cake and eating it too. Don’t you get eaten alive in the process? When the premium starts to fade and disappears, and the ?Big Dogs? are still heavily short, then you can safely short the currency.

The most important aspect forex trading of the COT. Report for most traders is the change in net standings of the forex trading commercial hedgers. Why? Because studies show that forex trading commercials hold a superior record to other trading groups in forecasting significant forex trading market moves. The large commercials are generally believed to have the best fundamental supply and demand information on their forex trading markets, and thus position their trades accordingly.

Along with the advantage of having the best fundamental supply and demand information on their forex trading markets, large forex trading commercials also trade large size, which in itself moves forex trading markets in their favor. It’s important here to note that whether a particular trader group is net long or net short is not important to analyzing the forex trading COT. report. For example, forex trading commercials in silver are the producers and they have never been net long, because they hedge their sales. In gold, however, the forex trading commercial mix is more heavily weighted toward fabricators who buy long contracts as a hedge against forex trading future inventory needs. So, again you need to look at the net change in locations from the previous report or several of the recent reports.

Individual traders that consider positioning themselves on the same side of the forex trading market as large forex trading commercials, when the large commercials become one-sided in their forex trading market view, is the best way to utilize the COT report.

Some traders do like to take the opposite sides of the trades on which the small trader in the forex trading C.O.T. reports are shown taking. This is because most small speculative traders of forex trading stocks markets are usually under-capitalized and/or on the wrong side of the forex trading market.

Also, some traders will also follow the coat-tails of the large speculators, thinking the large specs must be good traders or they would not be in the large trader category.

In forex trading commodities stocks trading, the Commitments of Traders (COT) report is the only source of vision into the forex trading market locations of the key players. The COT report gives a breakdown of each Tuesday’s open interest for forex trading markets in which 20 or more traders hold standings equal to or above the reporting levels recognized by the CFTC. The CFTC classifies traders into three groups: commercial traders, non-commercial traders (large speculators), and small traders (small speculators). All of a trader’s reported forex trading stocks standings in a commodity are categorized as forex trading commercial if the trader uses those contracts for hedging.

 

 


 

 

Intraday Trading

 

5.1 Breakout Trading

5.2 Short Term Vs Long Term Trading

5.3 Putting Intraday Trading Into Prospective

5.4 How To Use Cot Data

5.5 Random Dates Vs Cycle Dates

5.6 Markets Runs

5.7 Focus Our Profits

5.8 To Exit Or Not To Exit

 

 


 

Forex Education

 

The Basics of Currency Forex Trading

Technical Analysis

Technical Indicators

Fundamental Analysis

Intraday Trading

Emotional & Behavioral Part

Risk & Money Management

Trading Guide