That said, it does have its critics and their issues with the report are justified. The biggest weakness with the COT is that, for a document meant to promote transparency, the rules governing it are not transparent. The report provides investors with up-to-date information on futures market operations and increases the transparency of these complex exchanges. It is used by many futures traders as a market signal on which to trade. To help you analyze important trends and movements using the Commitment of Traders reports, Tradingster.com provides up-to-date COT reports (including COT reports’ historical data) and free COT charts. Commercial traders are big institutions who are in the futures market to hedge against risks due to unfavorable price movements that could affect their investments.
- The traders in this category mostly are using markets to hedge business risk, whether that risk is related to foreign exchange, equities or interest rates.
- Specifically, the COT reports provide a breakdown of 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.
- In this example, we will use gold futures COT and compare it to EUR/USD prices.
- A “money manager,” for the purpose of this report, is a registered commodity trading advisor (CTA); a registered commodity pool operator (CPO); or an unregistered fund identified by CFTC.
Commitments of Traders
And the weight these traders pull on the markets can sometimes be staggering enough to drive trends. As retail forex traders, our best bet is to trade like big financial institutions. It is not investment advice or a solution to buy or sell instruments. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading in foreign currency contracts or other off-exchange products on margin carries a high level of risk and is not suitable for everyone. We advise you to carefully consider whether trading is appropriate for you in light of your personal circumstances.
How a Commitments of Traders (COT) Report Works, Types, Example
On the other hand, a divergence between the above can signal the opposite. 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.
How the Commitments of Traders (COT) Report Works
In this lesson, we will focus on how and where you can retrieve the COT report. The COT report is prepared and published every Friday at 3.30 PM ET by the US Commodity Futures Trading Commission. However, you can access the latest report and those from previous issues at the CFTC website. COT reports can be obtained from the CFTC website and can be downloaded in several file formats. This article is for general information purposes only, not to be considered a recommendation or financial advice.
This use of the COT report is similar to how you might use a sentiment indicator, such as the Current Ratio FXSSI indicator, in a forex sentiment analysis. The long report, in addition to the information in the short report, groups the data by crop year, where appropriate, and shows the concentration of positions held by the largest four and eight traders. Due to legal restraints (CEA Section 8 data and confidential business practices), the CFTC does not publish information on how individual traders are classified in the COT reports.
In this case, traders can see what market participants in other markets are doing and compare it to the instrument they are trading using intermarket analysis techniques. Open interest held or controlled by a trader is referred to as that trader’s position. 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.
To use the COT Report as a volume indicator, keep your eyes on the open interest numbers of an asset. When there is a rise in the open interest of an asset, it means more people are trading the futures contract of the asset. It is important to remember that correlations change over time; however, since the Euro, British Pound, and Gold are all priced in USD, the correlation is expected to remain close to its averages unless a major change happens. The Legacy and Disaggregated reports are available in both a short and long format.
However, the original COT reports are text based and the CFTC does not provide any data analytics tools. Barchart Premier Members can choose from a Detailed Report where you can page through the last 52 reported weeks of data, or a Summary Report, showing just the last reporting period. To get better results, you can use the data from the COT report to complement your technical analysis from other forex trading tools. The COT report can serve as a powerful forex volume indicator when you use it rightly.
The Commitment of Traders (COT) report is a weekly publication that shows the aggregate holdings of different participants in the U.S. futures market. When graphically shown on charts, you actually see what is referred to as the Net Traders Positions which is the actual difference between the number of long positions held by each group minus the number of short positions. Thus a positive number means they hold more long positions than short and vice versa. Looking at the COT example in the table above, we can see that Nasdaq 100 futures, traded on the Chicago Mercantile Exchange (CME) had an open interest of 57,779 contracts on June 15, 2021. Of these, 14,320 were longs held by dealers and 10,875 shorts sold by institutional traders.
This means that an oil company with a small hedge and a much larger speculative trade on crude will have both positions show up in the commercial category. Simply put, even the disaggregated data is too aggregated commitment of traders forex to be said to accurately represent the market. Non-commercial traders are large speculators who already have a lot of money in the bank, but want to make some more by trading the futures market.
Since CFTC releases the weekly report every Friday for all trades recorded before Tuesday, you can only use it for long-term trades. But if you need details on past data, check the historical data section of the CFTC website. And if you need to check the weekly reports in a particular month, use the Historical Viewable section of the website. Open interest is the total of all futures and/or option contracts entered into and not yet offset by a transaction. The aggregate of all long open interest is equal to the aggregate of all short open interest. The larger the net short position of the small trader (relative to history) and the extent that small traders are holding a position “against” the trend are factors that will add to the bullishness of the report.
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. The COT reports provide a breakdown of 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.
He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem. In early October 2009, EUR futures net long positions hit an extreme of 51,000 before reversing. As you can see, the currency pair just came from a downtrend and is making a reversal to the uptrend at about the same time. There are two ways to use the COT report to spot potential reversals in the forex market. Many traders and analysts use this tool and have developed custom indicators driven by COT.
The COT provides an overview of what the key market participants think and helps determine the likelihood of a trend continuing or coming to an end. If commercial and non-commercial long positions are both growing, for example, that is a bullish signal for the price of the underlying commodity. The report history provides historical positioning thresholds or extremes that were previously reached. Although markets grow and do break and create new position levels, the existing historical position levels have proved to be significant many times in the past. Generally, the data in the COT reports is from Tuesday and released Friday. The CFTC receives the data from the reporting firms on Wednesday morning and then corrects and verifies the data for release by Friday afternoon.
Department of Agriculture’s Grain Futures Administration issued an annual report outlining hedging and speculation activities in the futures market. In the 1990s, the report moved to a bi-weekly publication before going weekly in 2000. COT reports are used by many speculative traders to help making decisions on whether to take a long or short position. One way to use the COT report in your trading is to find extreme net long or net short positions. So, when you find that their positions on a certain futures contract are reversing, and a reversal might be imminent on the underlying asset.
But with the COT report, forex traders can have an insight into these pieces of info. The COT report’s results can be used as a tool to give traders a better understanding of the psychology of the marketplace, the net position of the commercials in the market, and the net position of the large traders. Reporting firms send Tuesday open interest data on Wednesday morning. The CFTC then corrects and verifies the data for release by Friday afternoon.
The COT also delineates the number of contracts involved in spreads. In the middle of September, net short positions hit an extreme of 45,650. Notice how the non-commercial’s long positions increased by 2100 while their shorts reduced by 20. So, it is difficult to accurately track the volumes behind all forex trades. It is also harder to know what the big banks, the large speculators, and other market drivers, are doing.
For forex traders, reading through the COT report might seem cumbersome. If you are interested in trading the forex market using the COT report, some economic calendars make available relevant snippets of select speculative net positions from the report. Below is a screenshot from Investing.com showing the latest release of the COT report on September 18, 2020, at 3.30 PM ET. Forex traders may use currency derivatives COT reports to find large net long or net short positions.
This is where COT stands out, as it relies on a different type of data that doesn’t take prices into account; the data is simply driven from the total number of open positions and has nothing to do with instrument pricing. As always, all trading tools are vulnerable to criticism and can be scrutinized. Read on as we can summarize some of the main advantages and disadvantages of using the COT report as a trading tool. 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. Keep in mind that the small trader’s net position is usually vulnerable to either long liquidation or short-covering if the market starts to move against them. These contracts, sold in lot sizes that vary by currency, net out to have either a surplus of buy requests (positive values in the chart) or sell requests (negative values).
The market will be in a weakened bullish set-up “if” the two-week trend in the large trader position is down, or in other words, if the funds are in the process of liquidating their net long position. 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. This group of traders is generally thought to be small speculators and hedgers who are not holding a position large enough to report to the CFTC. In general, the large speculator category represents fund traders and professional traders who carry large positions. The Commitments of Traders (COT) reports can sometimes give traders a good idea of future significant moves in the market. Every other reportable trader that is not placed into one of the other three categories is placed into the “other reportables” category.
The Commitment of Traders (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. Commitment of Traders (COT) charts are updated each Friday at 3pm CT. The disaggregated COT report is another one that is commonly known by traders.
We recommend that you seek independent financial advice and ensure you fully understand the risks involved before trading. Looking at forex trading, the chart below shows GBP/USD with its COT net positions applied. The focus here is on the position levels when it reaches its all-time extreme and the price action development afterwards. The extreme levels are marked with blue circles for large speculators.
The report contains all the positions of the main market factors in the United States. As the value of the net short positions of non-commercial traders (the green line) dropped, so did EUR/USD. If the commercial traders are going heavily bullish while the non-commercials are heavily bearish, the market could experience a reversal to the uptrend. And if commercials are going short while non-commercials are going long, a reversal to the downtrend may occur. The chart below is for Euro futures with its COT data applied; the blue line on the price chart shows prices making higher highs while large speculator positions are making lower highs.