How to follow big players in Forex Trading- Commitment of Traders Report

There are many different ways to analyze the reports, but for the most part, the large traders’ net position and “change in position” over a two week period are the most important numbers to watch. The Commitments of Traders (COT) reports can sometimes give traders a good idea of future significant moves in the market. The Asset Manager/ Intermediary Classification includes pension & mutual funds, endowments, insurance businesses and investment managers with mainly institutional customers.

Commodity COT Data

Large specs include mainly hedge funds and banks trading for speculation purposes, and for the most part, have no need to use the futures market as hedging, with the sole intention being profit-driven. Large specs are characterized by being trend-followers, guided by fundamentals and without the need to change their views frequently, given that their involvement in the market tends to occur, barring unexpected events, at key macro levels where enough liquidity is available. The Commitments of Traders is a weekly market report issued by the Commodity Futures Trading Commission (CFTC) enumerating the holdings of participants in various futures markets in the United States. It is collated by the CFTC from submissions from traders in the market and covers positions in futures on grains, cattle, financial instruments, metals, petroleum and other commodities. The exchanges that trade futures are primarily based in Chicago and New York.

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. 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. A trader’s long and short futures-equivalent positions are added to the trader’s long and short futures positions to give “combined-long” and “combined-short” positions.

1. Hence, sending a signal that the market could be on the cusp of a turnaround.
2. By integrating COT data with technical analysis, traders can build a more holistic approach to market analysis.
3. 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).
4. The COT Public Reporting Environment (PRE) provides an application programming interface (API) to allow users to customize their experience with the COT market report data.

Noncommercial traders are speculators, such as individual traders, hedge funds and large institutions, which operate on the futures market and meet the reporting requirements. The other two account types that we want to pay attention to include asset managers and dealers. The former are institutional investors who tend to act commitment of traders forex slowly in established trends and include pension funds, endowments, academic institutions, insurance companies, mutual funds and those portfolio/investment managers who predominantly represent institutional clients. Meanwhile, dealers are typically described as the “sell side” of the market or net hedgers. They don’t take positions to speculate for profits but instead design various financial strategies to allocate assets to institutional clients. They tend to act as liquidity providers and have matched books or offset their risk across markets and clients.

How to Read the Commitments of Traders reports

Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing one’s financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading.

While the COT report offers valuable insights, pairing it with technical indicators can improve decision-making. Indicators such as moving averages, Bollinger Bands, and the MACD (Moving Average Convergence Divergence) can help confirm signals from the COT data. The next COT Report for Euro Fx by the CFTC will come next Friday and includes previous Tuesday’s data. MarketBulls provides you with the live COT Data for Euro Fx as soon as possible. We want our tools to be the best on the market and we would appreciate your insights on potential enhancements.

How to follow big players in Forex Trading- Commitment of Traders Report

1. However, a few nuances apply, which makes this category a very interesting one to follow closely.
2. Market-bulls.com does not accept responsibility for any loss or damage arising from reliance on the site’s content.
3. The Nonreportable Positions are just the difference between the positions of reported traders and the long and short open interest of a future.
4. If you wish to have the report update on open, right click on the report and select “Data Range Properties”.
5. An important feature of COT in trading refers to the ability to filter data.
6. Traders can examine historical COT data to observe patterns and establish baseline readings for specific markets.

Open interest, as reported to the Commission and as used in the COT report, does not include open futures contracts against which notices of deliveries have been stopped by a trader or issued by the clearing organization of an exchange. The short format shows reportable open interest and week-to-week open interest changes separately by reportable and non-reportable positions. For reportable positions, additional data is provided for commercial and non-commercial holdings, spreading (in certain categories only), changes from the previous report, percent of open interest by category, and numbers of traders.

Take Your Trading To A New Level

The Commitments of Traders (COT) reports are provided by the Commodity Futures Trading Commission (CFTC). 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. The short report shows open interest separately by reportable and nonreportable positions.

We’ve probably come to one of the most overlooked categories, but not necessarily one to brush aside, as it can provide some great hints and can also act as a contrarian indicator. 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. This category is probably one of the most sophisticated (large banks, dealers in securities, swaps and other derivatives) and knowledgeable about future market directions.

Firstly, to prove the point that they tend to be right most of the times, find below a chart of the Euro/US Dollar where I show how all the sustainable trends have one main characteristic behind, and that is, they are unambiguously driven by the large specs category. It doesn’t matter the futures market you analyze, the same pattern will keep popping up, that’s why knowing their intentions and current positioning is cardinal. In layman’s term, the smart money is simply a fancy term to describe the traders/entities with the most knowledge to be consistently profitable and with an ability to move the market, given the large size of their transactions. These account types are referred to as large specs and we may also include leverage funds (also known as speculators).

Using COT data in conjunction with technical analysis can improve the accuracy of reversal predictions. For example, if a currency pair shows an overbought condition on a technical indicator like the RSI (Relative Strength Index) and the COT report reveals an extreme long position, this dual confirmation may signal an upcoming bearish reversal. InsiderWeek makes it easy for you to understand and effectively use COT data, with a user-friendly interface that allows you to work effortlessly with COT data charts and other COT report information. The reports cover a wide range of markets, including key commodities such as gold, oil, and palladium, currencies like EUR/USD and GBP/USD, and global stock indices like the S&P 500. 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.

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. 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. However, a few nuances apply, which makes this category a very interesting one to follow closely. Firstly, when a directional move in price, let’s say a bullish one, comes amid an increase in total commercials, that should be considered an anomaly that will prompt us to ask ourselves the following question.

The right interpretation of this information is key to determine a bias. The Commitment of Traders (COT) Report is a key component of market analysis, which is to provide insights into the positions and strategies of various market participants. Current COT data is especially important as it offers unique transparency, while the COT Price reveals price movements based on the actions of major participants.