Commitments of Traders COT Charts

As an example, if EUR/USD trades from 1.13 to 1.16 in the last 5 trading days the data is collected, and commercials show an overall increase, it’s telling us that they are betting with conviction for the price not to trade much lower. Otherwise, they may have refrained to gain that much exposure, waiting for lower prices. Unlike the opaque and fragmented state of spot forex, with no exchange or central entity that facilitates transparent price discovery, future and options markets in the US must report the actual volume that is transacted. What this means is that there is a component of transparency in the data reported that will never be as accurate via spot forex.

The Commitment of Traders report is a powerful resource for traders looking to understand market sentiment, identify potential reversals, and develop long-term trading strategies. By studying the positions of commercial and non-commercial traders, traders can gain insights that enhance their market analysis. When used alongside technical and fundamental analysis, the COT report helps traders make more informed decisions, enabling them to navigate the complexities of the markets more effectively. Forex traders use the COT report primarily to analyze the sentiment on major currency pairs, especially those with futures contracts on the Chicago Mercantile Exchange (CME).

The Structure of the COT Report

The Commitment of Traders (COT) report is a weekly publication that shows the aggregate holdings of different participants in the U.S. futures market. COT reports are used by many speculative traders to help making decisions on whether to take a long or short position. Over the years, the CFTC has improved the Commitments of Traders reports in several ways as part of its continuing effort to better inform the public about futures markets. Margin trading involves a high level of risk and is not suitable for everyone. You should carefully consider your objectives, financial situation, needs and level of experience before entering into any margined transactions with Blueberry Markets, and seek independent advice if necessary. Margin Forex and CFDs are highly leveraged products, which means both gains and losses are magnified.

Released weekly by the Commodity Futures Trading Commission (CFTC), this report provides a snapshot of the positions held by commercial and non-commercial traders, along with a breakdown of open interest in various futures markets. For traders interested in understanding market dynamics, the COT report can be an invaluable asset, guiding market analysis and helping refine trading strategies. The COT report focuses on traders whose positions meet or exceed the CFTC’s established reporting levels. This captured data allows analysts to assess market sentiment and positioning.

One more clue that helps is to monitor the percentage of open interest vs outstanding positions in a particular category of traders. This concept has many resemblances to the comparison of total committed positions vs historical levels in the past, but it goes one step further, by also factoring in what percentage it represents from the total outstanding positions. Next comes the non-commercial positions, often referred as large specs. Remember that given the similarity of their business nature and correlation in positions, we will also include leverage funds in the explanation.

1. These are essentially clients of the sell-side participants who use the markets to invest, hedge, manage risk, speculate or change the term structure or duration of their assets.
2. Non-commercial traders, on the other hand, are often speculators reacting to price changes rather than underlying market fundamentals.
3. As part of the classification of traders, there are certain types, most notoriously, the large specs (smart money) and the commercial accounts, that due to their business purpose, will provide the most insights.
4. But it is not a timing instrument and does not give any clear information when to enter the market.
5. This category includes corporate treasuries, central banks, smaller banks, mortgage originators, credit unions and any other reportable traders not assigned to the other three categories.
6. Like the commercials, dealers also fulfill a function of net hedgers, so it’s not at the core of their business model to speculate in the future direction of prices, as in the case of non-commercial/large specs.

Commercials are the most important players in the markets as they often hedge their holdings and tend to have the most insight into the movement of future prices. In a healthy trend, we should watch commercial positionings going with the trend. As an example, let’s say dealer A creates a customized investment product for investor B (large spec).

1. This document comprises a handy personal notebook, where I annotate the most recent changes in positioning in order to assist my weekly analysis.
2. We want our tools to be the best on the market and we would appreciate your insights on potential enhancements.
3. 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.
4. That’s the theory, and it makes perfect sense as these accounts have an inherent interest to cover their exposure through the constant buy/sell of the futures or options to eliminate the risks of exchange rate variations.
5. The long and short open interest shown as “Nonreportable Positions” is derived by subtracting total long and short “Reportable Positions” from the total open interest.
6. The Position Data is based on reports by different firms, like clearing members and brokers.

The Dealers may not mainly sell futures, but they design and sell different financial assets to their customers. Their business activities/ products are highly connected to the futures they buy and sell. The Dealer/ Intermediary Classification includes large local and international banks and dealers in different derivates. On the other hand, the Non-commercial Traders are the Large Speculators. That includes all traders that are not getting classified as commercial traders. Classical Non-Commercial Traders are Hedge Funds and Investment Banks.

By integrating COT data with technical analysis, traders can build a more holistic approach to market analysis. The analysis of COT data offers numerous advantages that are highly important for both beginners and professional COT traders. An important feature of COT in trading refers to the ability to filter data. Traders can organize information by assets, such as gold, oil, or COT futures on currencies like EUR/USD.

Automated Trading

Clearing members, futures commission merchants, and foreign brokers (collectively called reporting firms) file daily reports with the Commission. Those reports show the futures and option positions of traders that hold positions above specific reporting levels set by CFTC regulations. The aggregate of all traders’ positions reported to the Commission usually represents 70 to 90 percent of the total open interest in any given market.

For instance, the report includes data for the euro, British pound, Japanese yen, and Canadian dollar, allowing forex traders to gain insights into the sentiment and positions of large institutions and speculators. Information that is included in the report is compiled on Tuesday and verified on Wednesday before being released every Friday. The report is intended to help people understand the dynamics of the market. Commodity Futures Trading Commission, “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 COT reports are based on position data supplied by reporting firms (FCMs, clearing members, foreign brokers and exchanges). While the position data is supplied by reporting firms, the actual trader category or classification is based on the predominant business purpose self-reported by traders on the CFTC Form 40 and is subject to review by CFTC staff for reasonableness.

For reportable positions, additional data is provided for commercial and non-commercial holdings, spreading, changes from the previous report, percents of open interest by category, and numbers of traders. It acts as a sentiment indicator, allowing traders to assess if the market leans bullish or bearish based on the net positions. Analyzing case studies of how other traders have utilized the COT report to identify trends and sentiment can be helpful. By examining instances where COT data, combined with other analyses, led to accurate trades, traders can refine their own COT integration strategies and potentially avoid common pitfalls. Several financial websites and publications offer case studies and analyses based on COT data.

CoT Charts

It is possible that there’s a lack of a sufficient number of Large Traders with respect to the contract market in question. Specifically, when the number of reportable Large Traders drops below 20 for a commodity or contract market, it no longer appears in the COT report. In such event, once a contract market has again reached 20 or more reportable Large Traders, the contract market will be added again to the COT Reports. This same report is updated commitment of traders forex on a weekly basis without any change to the url. This provide us with the opportunity to pull this report weekly by using Web Query, one of the relateively unknown function in Excel. This document comprises a handy personal notebook, where I annotate the most recent changes in positioning in order to assist my weekly analysis.

Trading Signals

Understanding these categories is essential, as each group has unique motivations that affect how they approach the market. For example, commercial traders usually follow market trends for protection against price risks, while non-commercial traders often aim to profit by taking speculative positions. Many speculative traders use the Commitments of Traders report to help them decide whether or not to take a long or short position. One theory is that “small speculators” are generally wrong and that the best position is contrary to the net non-reportable position.