Understanding the COT report
Long term investors very often analyze the position of currency pairs, net long or net short positions looking for market reversal or trend continuation.
One of the reports that professional traders use is the COT report. In simple words, the COT report shows how committed the large institutional traders are and presents long or short positions for each currency pair or other asset.
What is the COT report?
The Commitment of Traders Report or the COT report is a weekly chart report representing total long and short positions held by Commercial Traders, Non-Commercial Traders, Non-Reportable Traders that final goal is determining the overall market sentiment. Commercial Traders are large multi-national corporations. Non-Commercial Traders are large speculators that trade in specific futures markets. Non-Reportable Traders are usually small retail traders, leveraged players without significant capital. This type of report is released every Friday. When the reports are released on Friday, they contain data that is relevant up until Tuesday of the previous week.
The COT details open interest for each commodity on the market specifically containing 20 or more traders. The main purpose of this report is to effectively provide traders with a level of overall transparency in terms of open interests in various markets. This report is also used to determine the size of certain positions for different groups of traders. This report also provides a total number of open interest for each specific day. This is very helpful for traders because this information is critical in order to continue with investments. This type of source is extremely reliable to get insight into all the different types of trades and how this can increase or decrease over time. Many people wonder how to read the COT report.
How to use the COT report in forex trading?
The simple explanation of how to use the COT report in forex trading is based on Commercial Traders (big institutional traders) behavior. When the spread between commercial traders and large investors is big, then we should expect a market reversal. When large traders start to reverse their positions (i.e. the large investor’s line’s trend starts reversing), we can expect a market reversal most of the time.
How to interpret the COT report video is below:
How to Read the COT Report
What we can see in the COT report :
But let us see that on a simple image. I use the freecotdata.com website to see COT report charts well designed. Look example :
You can visit the website FreeCotData and see free reports.
So on this image, we can see for example the March 2017 USD dollar COT report. How to Read the COT Report of USD dollar in this example? So we see that Commercial Hedgers (speculators) are 100% and Dealers at 0%. Huge spread. And we see market reversal after that.
Forex profits with COT report
The most important thing is to understand that there are no easy forex profits with the COT report. COT report we can use for only long term prediction and trader can not use this report for intraday trades, short time trades.
Let we see another example:
More about the COT report
Understanding the COT report is crucial to success as a trader. Many traders starting out in the industry are unsure of how to best use the COT to assist them on a day to day basis. COT provides insight and information regarding what institutional traders are doing in the market. COT reports serve a very important role as they directly contribute to how successful a company may be. These reports enable traders to analyze the information and properly make use of it in the market. The COT report includes long and short positions in the trading market. This is a critical aspect of helping traders understand best how to maneuver the market. Not every single type of trade that is included in the report is significant.
The main report released every Friday has separated into five categories. The five categories are then broke it up into three subcategories. The first of the five is known as processors and users. Processors and users are types of trader who effectively uses future markets as the hedge to their commodity of cash. These traders consume high quantities of the commodity to trade the commodity within the cash market. The next type of trader is known as a swap dealer. Swap dealers have an important role as they are responsible for swapping commodities in future markets. They also manage the hedged risk associated with those swaps. Swap dealers manage the terms often work with the opposite side of the deal for hedgers and large speculators. The next type of trader is known as a manage money trader. A managed money trader is a commodity trading advisor. Managed money traders are also known as CTA’s. These are hedge funds that hold large and complete speculated positions in the future market. The next type of trader is known as a reportable trader. Reportable traders are different from the three other types of traders. These traders have substantial positions as defined by the CFTC in a given market. The last type of trader is known as a non-reportable. Non-reportable traders are also outside of the first three categories, however, they have a small position defined by the CFTC. These are the main types of traders and the positions they hold in the future market.
The next category has to deal with positions. There are three main positions for trading categories. They include long, short, spreading. A long position relates to the number of traders there are in any long market. A short position relates to the number of traders that are in a short market. A spreading position relates to the number of positions in a trader category. This is very important to know as there are many different ways to look at the trading industry. There are many different ways to analyze moves made within the trading industry and how to best move forward. There are statistical categories in addition to all the other categories. Statistical categories are unique in position size changes and prevent open interest. Some of this category are directly affected by the number of resources invested as well as how many traders are in a specific category. The statistical categories serve an important function for the benefit of each trader. Without these specific subcategories, there would be no way for traders to differentiate the information. Therefore subcategories play a crucial role.
The most common type of traders includes commercial traders, these types of traders represent certain companies. These types of traders also read at present certain institutions. These types of traders use the futures market to offset all types of risk. The offset of the risk is directly correlated to the cash or spot market. A certain producer may produce less of a product in order to prevent wasted goods. This is an example of commercial trader commercials to try to protect profit if the price falls. This is a very important analytical strategy in order to benefit return Vesters. Many of the commercial traders do not receive as much attention as they should because they are overlooked. This is one aspect of the COT report. The next type of trader that is paid attention to on the report is non-commercial traders. And non-commercial trader it is a large institutional investor these large in the two still investors are similar to hedge funds. Many people wonder how to read the COT report.
These large institutional investors help entities trading in the future market. These institutional investors help entities with investment and growth potential they are not usually involved in a production. As a result of their limited involvement. There is less to be concerned with. And the management of underlying commodities or assets is paid attention to in this category. The next type of trader paid attention to is a non-reporting traitor. And on reporting trader doesn’t associate with many individual traders As a result of their position in the industry. They are traders that you will see categorized against the flow versus with the flow. This is an important part to note as non-commercial traders do not hold a significant place in the trading market. Non-commercial traders are useful for raw data however not beneficial for the advancement. Non-commercial taters are examined more closely than commercial traders therefore they use more types of analytical information. Non-commercial traders change are in Long and pet store positions. By changing long-term positions it tells the trailer about the trend. By looking at the trend there is a new investment they can be made. A long position has declined well as your position may have increased a short position can also increase why I long for the declines. All subjects are relevant to change and likely to change depending upon the future market.
There is a COT report for crude oil. COT reports recruit will decline in sediment. COT reports are important for market reaction. COT reports of crude oil can be shown in the diagram and graph below.
The graph shows gradual increases and gradual slopes. The graph all the social spikes as well as immediate flat lines. There are many reasons to be cautious about the risk of exposure with protective options for crude oil charts. The weekly data used is useful however needs additional insight. With additional insight, there are excellent sources of reputable information from a variety of sources. Reputable information will give a perfect example of how net position is held against traders in the European and United States market. European and the United States markets can be measured by three EUR and USD. A disability report is a traditional technical indicator. The traditional technical indicator analyzes price and time. The traditional indicator also applies filters to the report. This is important as it helps to better understand the entire process. There are other countries that may be involved in trades and therefore they use their own types of currency. When these industries use their own currency, there must be a conversion rate to be done among strangers.
The trade is complete with a report graph. Report graphs are unique as they directly correlate to the amount of time needed in order for a traitor to make a certain trait. Want to try to make the trade within a certain timeframe the aspects of the chair analyze to the system. The system and the industry will generate whether or not the trade becomes successful and whether or not the trade will last long term. If that tree does indeed the last long-term there are many ways to help ensure that it advances quickly in the system. Some of the best ways are hard to manage the spikes and lows within the system charts. Traders within that short or seen on the red line of graphs charts while traders with the long have been. The most effective way to assume that the underlying trend is another flip that could occur at any time.
This will help build the buyers for relatively simple trade markets and continue to create a theme of effectiveness many different trade market experiences and therefore able to better assist. One of the best ways is to ensure that every situation occurs within a time frame that is specified. The trend is recorded on graphs and graphs are one of the most important analytical factors for traders want to grab his analysis properly there is no need. When the trend is effectively managed there is less risk of the associated this is very important as it helps every single trying to understand the analytical information probably use in the market the best way. The best way for the CO T is to read the report and is crucial to access as a traitor. And they’re a very important role as the directly contributed successful company could be. These reports are specific to enable.
Therefore, reading COT reports is not difficult and can be done easily. The best way to read COT reports is to access them the right way. There are a few main ways to access COT reports. Some of the main ways include IMA and CFTC. The IMA provides access to the COT reports directly from insider market advisory. Insider market advisory is also known as IMA. The IMA subscription page works directly with the COT report. Insider market advisory, also known as IMA, is the premier trade advisory service. This trade advisory service provides morning and afternoon snapshots. The information they give is relevant for all eight markets in the sector and can be easily joined. Regardless of the trade category, all traders have one thing in common. They share the ability to invest in the market and access potential risk or loss. This is very important to note as it contributes to the overall success of the industry. As stated previously, traders can be processors, users, swap dealers, reportable, or non-reportable. Therefore the types of traders can vary in one specific market.
The best site for the COT report for me is Free COT data. (images in these articles are from this website).
The second way to access COT reports is through CFTC. CFTC has a website that has the newest and latest COT reports available every Friday. In order to locate the reports, users have to go to the site and select a COT. Finding the COT reports on either website is easy and effortless. This offers a full range of benefits such as market sectors, exchanges, past reports as well as insight on position sizes. There are countless resources and benefits from analyzing and using COT reports. These reports can be used and applied every day in business and require little to no effort to find. The best way for traders to look for reports is to use the most effective method. If traders are looking to learn more about all the benefits of COT reports and the best ways to use them, they can network and build a group of individuals that are ready and eager to commit to resource trading. Therefore reading COT reports significantly benefits traders in understanding exactly where their best investments will be. COT reports provide benefits for every trader in the industry regardless of size or purpose. These trade instructions are unique and can be applied to many different markets for a successful outcome.
Of course, the COT report is not a very reliable tool and we can not use it alone and decide investment based on the COT report only. This report we need to use only in combination with other indicators.
