Many speculative traders use the Commitments of Traders report to help them decide whether or not to take a long or short position. One theory is that “small speculators” are generally wrong and that the best position is contrary to the net non-reportable position. Another theory is that commercial traders understand their market the best and taking their position has a better chance of profit (which is pretty much the same thing as the “small speculators” being wrong). Afterwards, investors went bullish as the non-commercial traders started buying the pair. In the middle of November, as the net short positions hit the extreme level of 45,650, investors started to buy the EUR futures.
The legacy COT simply shows the market for a commodity broken into long, short, and spread positions for non-commercial traders, commercial traders, and non-reportable positions (small traders). 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.
Since 1995 the Commitments of Traders report includes holdings of options as well as futures contracts. The key thing here is for investors and traders to believe in their analysis and their opinions. The data used in the report is supplied by a number of organizations like clearing houses, brokers, and exchanges. The financial market is usually very regulated, something very important to protect the retail traders. The regulators in the US include the Securities and Exchange Commission (SEC), Commodities Futures Trading Commission (CFTC), and the Federal Trading Commission among others. In other words, it is the trader who is classified as commercial or speculative, not the trade.
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. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. For details of these awards and information on awards visit /en-hk/about-us/awards. Due to current legal and regulatory requirements, United States citizens or residents are currently unable to open a trading business with us. Your ability to open a trading business with Day Trade the World™ or join one of our trading businesses is subject to the laws and regulations in force in your jurisdiction.
Before entering, exiting or holding a particular asset, it is important to conduct a good analysis, based on the fundamental or technical indicators. If you believe that the EUR/USD will go up, then you should go long regardless of what the Commitments of Traders report says. At times, the majority of the traders might be wrong while at other times, they might be correct. For example, the chart below shows the speculative net positions for gold. As you can see, the net positions were relatively stable in the past 12 months. Traditional trading lore has it that the way to use COT data is to “follow the commercials.” In FX, this is not always the best advice.
Traders tend to look at the seven major currencies (yen, euro, Swiss franc, sterling, Aussie, New Zealand, and Canadian dollars) both individually and as a whole. In addition to user-unfriendliness, the other big drawback to the COT report is that it is nearly a week late by the time you get the data. The report contains data collected each Tuesday and if there was a giant move on Wednesday and Thursday, by the time you get the report on Friday, the information could well be stale and not a good guide. However, the original COT reports are text based and the CFTC does not provide any data analytics tools.
For example, traders are classified as non-commercial or commercial, and that holds for every position they have within that particular commodity. 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 to be said to accurately represent the market. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors.
This is why big players like Goldman Sachs applied for (and got) a commercial designation, even though it is obvious many of its trades are actually speculative. Those designated “commercial” can usually get higher leverage from their brokers. Each Friday, unless there is a holiday, the Commodity Futures Trading Commission, a US government agency (CFTC), releases what is called a Commitments of Traders Report (COT) on a wide array of currencies, commodities and interest rate futures.
The CFTC offers a long form and a short form for each commodity on each of a dozen exchanges, plus breakouts for futures and options and futures alone, and other complexities. You can get lost in the contracts for milk and cheese before you find the currencies. 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 provides investors with up-to-date information on futures market operations and increases the transparency of these complex exchanges.
Thus a positive number means they hold more long positions than short and vice versa. The COT report is a relatively popular document commitment of traders forex used by many investors and traders. You need to combine its data with other fundamental and technical analysis techniques.
These may not necessarily reflect the opinion of Saxo or its affiliates. Access Weekly Commitments of Traders Reports, as well as trade analysis and recommendations for various markets, daily fundamental and technical market overviews, future price outlooks, and more through our Insider Market Advisory. When it’s at the lows, they believe that chances are high that the market will undergo a reversal. Investment banks and large hedge funds are also put in this category because they want to protect themselves from these sudden changes.
Similarly, if the six major currencies all showed that non-commercial accounts had sizable net currency longs (implying they were short US dollars), that might also raise a red flag. 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. The specific number is not necessarily important, but rather a clear sign in percentage terms of open interest which makes it easy in identifying ‘Non-Commercials’ flipping against the primary trend. Furthermore, when a key flip in sentiment of ‘Non-Commercials’ is realized and there is a confirmation on the charts that a trend is exhausting, traders are likely trading in the same direction of the big kids.