Commitments of Traders
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.
Commitments of Traders Report Analysis
The following information is included in a COT report:
(1) Open Interest Positions (Futures & Options)
(2) Short Report
(3) Long Report
(4) Number of Traders
(5) Reportable Positions
(6) Non-reportable Positions
COT Report Purpose and Effective Use
Traders use the Commitments of Traders (COT) report to decode the movement of 'smart money' and to help them decide whether the market will probably go up or down. In reality, 'small speculators' are generally wrong regarding their anticipations. On the other hand, commercial traders understand better the dynamics of the market, and copying their positions has a better chance of profit:
Go the opposite direction than Small Speculators
Imitate the Positions of Market Experts (Commercial Traders, Large Speculators)
Online Commitments of Traders Tool
These are two free online tools for Carry-Traders:
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