Hi everyone!
This thread I’m just opening, would like to share ideas about trading in the futures market using a simple but very effective tool, the Commitments of Traders report. I would be very much interested in your experiences and thoughts about this data and how it has helped your trading!
Personally I have first seen this data set roughly five years ago, and “fell in love with it” right away!
The concept that amused me at the time was that with this COT report you get a legal inside look in the markets --> you get to know what the main participants of these markets are doing!
If you are new to this report, let me explain to you the basics:
Who provides the COT report?
The report is prepared by the
Commodity Futures Trading Commission (CFTC)
What does COT report show me?
The Commitments 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. It separates traders into three groups: Commercials, Large Speculators and Small Speculators. Commercials are those participants of the market who either produce that specific commodity or use it for the daily business. Large Speculators are generally big investors, hedge funds holding more contracts than the reporting limits, Small Speculators are the “rest” (you and me, who hold fewer contracts than the reporting limit.
Conclusion: So basically the report shows you where these participants are standing on Tuesdays.
For an illustrated good explanation, I’ve found
this video on YouTube, it explains everything in understandable English what the Commitments of Traders report is about.
When does the report come out and where can I access it?
It comes out usually on Fridays, but on holidays (such as 4th of July) it comes out usually the next week Monday. This is a free data that CFTC publishes every week and is accessible on it’s site (
here).
For many years I had to go through a relatively difficult process of first downloading the COT data, converting it to usable format and then importing it in adequate program. If you check CFTC’s site, you will find that the data there is in a raw format that is hard to read… Well these days there are a few services that provide this data in an easily readable, graphical format. I’ve checked most of them, I think
this one can be considered the best. I like it because it has the cleanest data available (combined and corrected data) and all the COT report types that are available today!
Let’s get down to business… How does the COT report help my trading?
Well since now we know that it gives you a legal insight on major market participants positions, simply – in accordance with the threads title – you just have to follow the Smart Money! Ok-ok… you might say: “yeah, sure, but who is the smart money?” Well doing your homework and studying the historical reports (the classic COT report has been published since 1986), you will easily see that at certain times, especially in extreme COT situations, knowing where the major players are positioned, will help you enter on the right side of the market.
I’ll show you some great examples soon, but for now, let me leave the “story” at this stage, I would be very much interested in your thoughts and ideas, so please share them with me and if you have any questions, I’ll try my very best to answer them!
All the best,
D