COT Report - Home
Hello and welcome to one of my very recent sites, which I hope will explain all you need to know about the COT report. More importantly I would like to show you how I analyse the information it contains in several different ways in order to help me gain an alternative view of the markets. Using one set of market information, to obtain a view on another related market, is a very classical approach to trading and investing.
As I'm sure many of you know, I trade currency full time in the spot, options and futures markets, but have been involved in all aspects of trading and investing for over 15 years. All the sites I publish are free as I enjoy helping traders and investors learn about the different markets, and more particularly to understand the risks and rewards of each. In addition I like to provide what I hope are clear and concise explanations of topics such as this, which are often clouded in mystery by those on the 'inside'. The COT report is not some ' magic system' nor will it give you all the answers, but using some simple analysis and a little common sense, it is a another useful tool, in your trading toolbox.
COT Report - Introduction
Now as with many 'technical indicators' in the trading world, if you ask ten people for their opinion, you will get ten different answers as to the best way to interpret the data, and hence its value or otherwise. All I can say is, as a currency trader myself, this is how I use it, so if having read the site, you feel it makes sense, then please feel free to use the data in the same way. I must stress though, that this is only one of several tools I use.
However when combined with technical chart reading, and support and resistance, it does provide an insight into what is happening in the market, and is a classic example of how one market can help you understand what is occurring in another. The reason that the COT report has started to grow in popularity is purely because the spot forex market does not report volume. In order to try to overcome this problem, fx traders have turned to the COT report, to try to provide a view on both the sentiment, and momentum, in the spot currency markets.
So what is the COT report. In brief it stands for the Commitment of Traders Report and is a weekly report which is published at 3.30 pm EST every Friday afternoon, by the US Commodity Futures Trading Commission. The CFTC is the regulatory body in the US that manages and regulates the futures market. The report provides a breakdown of each Tuesday's open interest for futures markets in which 20 or more traders hold positions equal to, or above, the reporting levels established by the CFTC.
Now, I warn you now, when you first look at one of these reports ( which I'll show you in a minute ) they are not pretty, and can be very confusing! Before we have a look at one on the next page, and I explain all the details they contain, I must stress several things as follows :
- Long Term Indicator - by the time the data is available on Friday afternoon it is already 3 days out of date, so we use the information as a long term indicator of market sentiment, NOT for market timing
- Currency Inversion - when comparing spot markets and futures markets you must be aware that the markets report some pairs differently by inverting the pair, due to the way futures are based. I will explain this in detail later
- Volume Indicator - Open Interest as a momentum indicator of volume should only be used as another guide, NOT a definitive indicator
OK - let's take a look at how the COT report is presented to us in it's raw state.
