Follow the Smart Money / COT Analysis

I’m very happy to see that there is interest amongst you towards this report and the COT analysis that I know of!

Oz,
The service that I use has a page called Resources. There they list a couple of the best books that are related to the Commitments of Traders report and there are some great articles to read as well. I hope this will help you in the search of good literature in this topic.

I will be around, no worries Although I don’t consider myself a professional, but because I’ve been using the COT report for more than 5 years now, I have gathered some experience, which could be useful to others who are new the report.

Dunstan

haha I just found that website and started to go through the charts - I was wondering quickly I trade based on volume spread analysis.. this could help I assume but are there enough extremes in each week to make it viable?

COT analysis is definitely not for very short term traders, its best applied in a system that trades longer term.

In my experience there are times when maybe even for 3 month you will not find a decent COT signal and times when the density of signals is high, signals come each week.

As I have already told Hyperifh (post #12), COT analysis should not be considered an “only tool” rather a tool that can improve an existing system. It can signal great opportunities or confirm traders that your system wants to get into.

Yes, the service I use has a page called volume / open interest analysis also, I just haven’t talked about it yet, since it doesn’t connect directly to the COT report which is the title of this topic. I think that the system they have constructed is pretty simple but very effective also.

So I say this: if you are a day trader, the COT report may not be the best tool you are looking for, but trading on a medium to long term time-horizon it can effectively pinpoint large stresses in markets that will provide trading opportunities.

Dunstan

Ahh I see..

I was hoping to see if the weekly report would suggest possible supply and demand levels that I could use to then trade off with VSA.

Will continue to research as it is interesting!

Well done.

Thanks Manekineko for you post, excellent chart you have there!!! Exactly what I’m looking at also in a different way!

In the latest report (30th this year) you could find a pretty extreme situation in the COT report: Commercials are at a 434 report extreme level, while Large Speculators are at an All Time extreme – net long – level. This can definitely be considered an extreme picture, which means that the stress level of this market is becoming really high --> could be a good trading opportunity!

You are welcome. !!!! Yes the extreme levels are the most important. A change of hands or supply and demand in the market. Yep wheat and corn are in trouble. cotbase is new i think. I gave a look on their website last week.PS upperman book makes sense

Nice one! Witch chart services are you using?

Anyone as implemented COT data with TradeStation or Multicharts?

Martin

Good Morning,

I am a relatively new trader learning how to trade spreads and would like to seek advice on calculating the spread ratios for the two legs of the spread. Should I be equalising the dollar notional values of the two legs or should I be looking at the respective ATRs and equalising them / equalising volatility?

Let's say I'm doing a spread between the 6E and the 6A futures contracts.

Methodology 1 (equalise notional dollar value)

6E: 1.2168 X 12.50 = 15.21

6A : 1.0320 X 10 = 10.32

Spread Ratio: 15.21 /10 = 1.52

Methodology 2

6E: 12.50 per tick

6A: 10 per tick

Spread Ratio: 12.50 / 10 = 1.25

Methodology 3: Based on ATR and volatility

6E : 60 period ATR based on 1 day timeframe= 0.0104

So 0.0104 X 12.50 = 1300

6A : 60 period ATR based on 1 day timeframe = 0.0089

So 0.0089 X 10 = 890

Spread ratio: 1300 / 890 = 1.46

I am unsure about which is the correct way to calculate the spread ratio. I would really appreciate advice on this.

Bar chart.
At the bottom window there is Studies support Large.
Below there is Add study commitment of traders Line charts
http://www.barchart.com/chart.php?sy...&txtDate=#jump

The COT can be used in FX as well. There are reportables for currency futures. They have the Eurodollar, US Dollar, British Pound, Japanese Yen, etc.

It will be interesting if we could plot it in some software such as metatrader, let me see if i can code it up and share with you guys.

But do note that the data is for futures and not sure how it will suit the currency pairs.

Id like to share a link to a few indicators that are great for plotting Cot for MT4. At the bottom of the page (the comments area) has a video with instructions. Read the instuctions very carefully, as people often complain they cant make it work, but when you take the time it does work and its great!

http://articles.mql4.com/867/page6#comments
indicator and instructions at the bottom of page..................

For the below chart I used Tiff data, instead of the old legacy files, but none the less, great indicator, to plot COT data on mt4 platform

Can someone explain how I read this and apply it to my trading those other charts are so confusing this one seems easier to understand.

http://www.dukascopy.com/plugins/fxMarketWatch/

Thanks for your answer to my question Dunstan. I take your point as to how COT info should be used to corroborate other signals in order to add most value. I think it is absolutely ideal for this purpose as it is not data of the price action type - thus it can be seen as orthogonal to price action. Most other indicators just tend to deterministically transform PA and so continue to represent the same info. Any COT confirmation of a PA signal is then worth more than a PA-based indicator confirmation. That would be my reasoning, anyway.
I can see it working very well with any strategy trying to find the weakest/strongest currencies of the set (see http://www.forexfactory.com/showthread.php?p=5487117) so as to trade what Peter Crowns calls the 'hot hand'. Haven't tried yet, though.

Thanks again for those very clean and helpful posts of yours.

ok cotnet, w'ill be waiting..

I used the COT for a few years with "some" success I will folow this thread to see if it helps. Nice Job.

Hi everyone,

As I have promised last Friday, today I shall start bringing recent examples to this forum.

There is a so called „weekly COT review” that I follow on YouTube, the service that I’m using sends me these videos every week.

One of the most exciting markets that was mentioned (recent review), is the Wheat (Chicago), so today I’ll talk about this market.

On the attached chart I think even someone new to the report should see that we are at an All Time (or to be precise, close to All Time) extreme picture in the Commitments of Traders report on Wheat. It is only the Small Speculators who “still got space” to become All Time extreme, but still they are also very extreme.

I have also drawn on the price chart those places in time, when the COT picture was similar. This picture that we have now can definitely be considered a good signal from COT.

Now obviously I cannot say that this is the time to go short, it is up to you to decide how you wish to interpret the signal, all I’m saying is that the stress level in the market – as cleverly used in the review – is becoming extremely high. It maybe that prices continue further up for a few more weeks, I don’t know, but I do know that it will be this market that I will closely monitor in the near future.

I know that there might be traders now who are viewing my thread and are not comfortable trading futures or options on futures, so my note to them is this: there are ETFs (a great list here) that follow futures contracts and can be traded just like stocks.

The three Wheat ETF that I found:
WEAT: direction - Long / leverage -1x / exchange - LSE
SWEA: direction - Short / leverage -1x / exchange - LSE
LWEA: direction - Long / leverage -2x / exchange - LSE

Please let me know if you have any questions,
Have a great day,
Dunstan

Cocoa was also mentioned in the review, cause the change size in Commercials position was larger than average. It was 28% to be exact. Now this market could be a good example, how to react to a market, where we haven’t got an extreme COT picture. It is only the change in positions that was such that we can talk about it.

I think you should follow the same notes I’ve given earlier, to view this as a confirmation to your existing trading idea or it might just signal an opportunity that you should put in to your system and see whether it should be traded or not.

In the following chart I have indicated similar pictures when Commercial’s changed their net positions this way. I wouldn’t say that this signal is as strong as the one in wheat. If prices react to this and they start to fall, they might just fall to 2000-2100 level, but hey (!), if they do that and you’re in, that’s “fair enough” . Maybe we would get to a level in COT where it is signaling a good buy opportunity…

The four Cocoa ETF that I found:

NIB: direction - Long / leverage -1x / exchange - NYSE
COCO: direction - Long / leverage -1x / exchange - LSE
SCOC: direction - Short / leverage -1x / exchange – LSE
LCOC: direction - Long / leverage -2x / exchange – LSE

Please let me know if you have any questions,
Have a great day,
Dunstan

Hi Dunstan

Thank god you started off this thread. I have always been aware of the COT and its significance but never been confident to use it seriously. I will now be keeping a keen eye on this thread.

Where are you getting your screen shots from? I was hoping there would be some kind of programme we could develop in which we copy and paste the COT report into and it would automatically turn it into something like what you have been pasting.. to make easier reading.

Anyway, looking forward to watching this thread grow and learning from you.

Hi Viv108,

Thanks for your kind words

To answer your question, I get these charts from COTbase.com a web based service I use. Before I tried to create them myself in MetaStock, but it took too much time an effort so I was really glad to find them a few month ago… There are a few services out there, but this one has a unique analysis table which I found very useful.

There is a cool video as well that helped me better understand their system, to know how to use properly the tools that I have mentioned earlier in my thread.

You can also find useful information on the report at CFTC's page!

I’m glad that you are also interested in the Commitments of Traders report!

Let me know if you need any help!