COT or Commitments of Traders refers to a report that is published by the CFTC which presents the aggregate short and long trading positions in the US Futures Market.
This report includes the aggregate trading positions in many different asset classes and that includes Forex pairs as well. The report was originally introduced back in 1962 when it was incorporating thirteen agricultural commodities.
The Commitments of Traders is used as an indicator of the general market sentiment. The really important information deriving from this report involves the aggregate positions of Non-Commercial Traders.
Basic Information regarding Commitments of Traders
-The COT report is published on a weekly basis (3:30 EST, Fridays) by CFTC and presents information about interest rates, stock indices, and Forex rates.
-The COT report actually measures the total positions of three different market participants: commercial, non-commercial traders and small speculators in the US Futures Market.
(i) Commercial Traders
(ii) Non-Commercial Traders
(iii) Small Speculators
-As concerns Forex Assets, the COT report includes EURUSD, USDJPY, GBPUSD, USDCAD, USDCHF, AUDUSD plus a few more US Dollar based pairs as the USD against the Russian Ruble and the USD against the Mexican Peso
-The COT report can prove useful to Forex Investors only if they use it within a historical context. Forecasting the Forex Market by using individual COT reports can lead to false forecasts.
-Significant changes in the positions of non-commercial traders may indicate upcoming trend reversals in the Spot Market.
Trading the Foreign Exchange means buying a currency and at the same selling another. There are hundreds of reasons for a currency to appreciate or to depreciate against another currency. In this truly complex and dynamic trading environment these are some important tips for all Forex traders.
Finding the right partners when trading Forex (brokers, signal providers etc) will make the difference in your future trading performance. Don’t be in a rush to open a trading account. Review your potential partners, using the web (Google Search, Forex Peace Army etc). When you have come up with 2-3 good choices then start asking questions using the Live Chat service. Learn everything about your potential partners before depositing any money.
An easy way to evaluate a Forex Broker is to use the ratings of TradingCenter.org (Forex Rating Formula v4).
When you trade any financial market one of the first things that you should do is to seek and to apply a trading strategy. Any chosen trading strategy must be oriented to your trading style, to your risk profile, and to your personality. There are several different Forex Trading styles and a great variety of strategies for each style.
■ Scalping Strategies
■ Day-Trading Strategies
■ News-Trading Strategies
■ Swing-Trading Strategies
If you apply a manual trading strategy it is very important to apply it in the right timeframe. For example, if you implement a day-trading strategy using the popular RSI tool, you can select the M5 (5-minute) timeframe (30-70 levels). On the other hand, if you implement a Swing-Trading strategy based on MACD you can’t select the M5 timeframe, you must select the M30, H1, H4 or D1 timeframe. If you apply MACD on a M5 chart the results will mislead you and any good performance will just be the outcome of simple luck.
Before anything else make sure your strategy is effective by using it in a Demo Account. Usually, the trading conditions (requotes, slippage etc) in Demo Accounts are better than in Real Accounts, therefore if a strategy proves unsuccessful in a Demo Account doesn’t have a chance to prove successful in a Real Account.
If you decide to use an Automated-Trading Strategy then you can apply Historic Back-Testing. You may backtest a strategy using any trading platform, for example, MetaTrader-4. It is better to conduct historic back tests across many different time periods in varying market conditions in order to be sure that it is really effective.