To analyze COT (Commitments of Traders) reports, focus on the positions of different market participants like commercial hedgers, large speculators, and small traders. Look for extremes in long or short positions to identify potential trend reversals or continuations in the futures markets.
What is the COT Report and Who Publishes It?
The COT (Commitments of Traders) report is released weekly by the U.S. Commodity Futures Trading Commission (CFTC). It shows the open interest positions held by commercial traders (hedgers), non-commercial traders (speculators), and non-reportable traders (retail). The report is widely used by futures and commodity traders to gauge market sentiment.
How to Read Commercial vs. Non-Commercial Positions?
Commercial traders are usually hedging their exposure in the underlying asset and often go against the trend, while non-commercial traders are speculators who follow the market momentum. If speculators are heavily long or short, it could be a sign that the trend is overextended and due for a reversal.
Why Are Extreme Readings Significant?
Extreme long or short positions by non-commercial traders often signal that the market is overly crowded in one direction. This usually precedes a reversal. Traders watch for these extremes as part of contrarian trading strategies, especially when price action begins to diverge from positioning data.
How to Use COT Reports with Technical Analysis?
COT data works best when combined with technical indicators. For example, if COT shows non-commercials are heavily short, and price forms a bullish reversal pattern, it might signal a strong buying opportunity. Use tools like RSI, moving averages, and support/resistance levels along with positioning data.
Where to Find Visual COT Data?
While raw COT data is available on the CFTC website, visual tools like Tradingster, Barchart, and Investing.com make it easier to understand. These platforms convert the data into charts that highlight long and short positions over time, helping you spot shifts in sentiment quickly.
How Often Is the COT Report Updated?
The COT report is published weekly, every Friday, by the CFTC, and reflects positions as of the previous Tuesday. Traders should use it for understanding broader sentiment and not for short-term trades since the data is slightly delayed.
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